LONDON: Qatar’s dispute with its Gulf neighbors has hit the country’s banking sector as rating agency Moody’s Investors Service changes its outlook from stable to negative.
The agency said that if the current rift between Qatar and its neighboring Gulf countries is prolonged, it could trigger outflows of foreign deposits and other external funding. This could lead to the banking sector’s high liquidity buffers reducing.
“Against this backdrop, Qatari banks’ profitability will likely decline, with return-on-assets declining to around 1.4 percent for 2017, from 1.6 percent in 2016, driven by increases in funding and provisioning costs,” said Nitish Bhojnagarwala, a vice president at Moody’s.
In June, Saudi Arabia and a number of other Arab countries imposed sanctions on Qatar after accusing the Gulf state of supporting extremism and fueling instability in the region. The Arab states say that the sanctions can be lifted if a series of conditions are met. Qatar has so far refused to comply with their demands.
The lack of a resolution and continued uncertainty threatens to undermine Qatar’s economic diversification plans, the report said.
The rating agency said the banking sector’s outlook also worsened due to weakening operating conditions and the continued funding pressures the banks face.
“Qatari banks’ reliance on confidence-sensitive external funding has increased in recent years due to a significant decline in oil-related revenues,” said Bhojnagarwala. “This leaves them vulnerable to shifts in investor sentiment.”
Moody’s expects Qatar’s gross domestic product (GDP) growth to slow to 2.4 percent in 2017, a decline from the high levels of growth of around 13.3 percent recorded between 2006 and 2014. Growth rates will, however, remain among the highest in the Gulf, driven by the high level of government spending ahead of the FIFA World Cup to be hosted in the country in 2022.
The slowing economy, coupled with the regional dispute, will lead to a slight dip in asset quality, the report said. The system-wide problem loans are expected to increase to around 2.2 percent of gross loans by 2018, which compares to 1.7 percent at the end of December 2016, according to Bhojnagarwala.
Despite this increase, non-performing loans will remain among the lowest in the Gulf region into 2018. Continued capital spending by the government to support the economy coupled with regulations on government-related lending will help maintain low levels of NPLs, the report said.
Moody’s puts Qatar’s banks on negative watch amid regional dispute
Moody’s puts Qatar’s banks on negative watch amid regional dispute
Saudi investment pipeline active as reforms advance, says Pakistan minister
ALULA: Pakistan’s Finance Minister Mohammed Aurangzeb described Saudi Arabia as a “longstanding partner” and emphasized the importance of sustainable, mutually beneficial cooperation, particularly in key economic sectors.
Speaking to Arab News on the sidelines of the AlUla Conference for Emerging Market Economies, Aurangzeb said the relationship between Pakistan and Saudi Arabia remains resilient despite global geopolitical tensions.
“The Kingdom has been a longstanding partner of Pakistan for the longest time, and we are very grateful for how we have been supported through thick and thin, through rough patches and, even now that we have achieved macroeconomic stability, I think we are now well positioned for growth.”
Aurangzeb said the partnership has facilitated investment across several sectors, including minerals and mining, information technology, agriculture, and tourism. He cited an active pipeline of Saudi investments, including Wafi’s entry into Pakistan’s downstream oil and gas sector.
“The Kingdom has been very public about their appetite for the country, and the sectors are minerals and mining, IT, agriculture, tourism; and there are already investments which have come in. For example, Wafi came in (in terms of downstream oil and gas stations). There’s a very active pipeline.”
He said private sector activity is driving growth in these areas, while government-to-government cooperation is focused mainly on infrastructure development.
Acknowledging longstanding investor concerns related to bureaucracy and delays, Aurangzeb said Pakistan has made progress over the past two years through structural reforms and fiscal discipline, alongside efforts to improve the business environment.
“The last two years we have worked very hard in terms of structural reforms, in terms of what I call getting the basic hygiene right, in terms of the fiscal situation, the current economic situation (…) in terms of all those areas of getting the basic hygiene in a good place.”
Aurangzeb highlighted mining and refining as key areas of engagement, including discussions around the Reko Diq project, while stressing that talks with Saudi investors extend beyond individual ventures.
“From my perspective, it’s not just about one mine, the discussions will continue with the Saudi investors on a number of these areas.”
He also pointed to growing cooperation in the IT sector, particularly in artificial intelligence, noting that several Pakistani tech firms are already in discussions with Saudi counterparts or have established offices in the Kingdom.
Referring to recent talks with Saudi Minister of Economy and Planning Faisal Alibrahim, Aurangzeb said Pakistan’s large freelance workforce presents opportunities for deeper collaboration, provided skills development keeps pace with demand.
“I was just with (Saudi) minister of economy and planning, and he was specifically referring to the Pakistani tech talent, and he is absolutely right. We have the third-largest freelancer population in the world, and what we need to do is to ensure that we upscale, rescale, upgrade them.”
Aurangzeb also cited opportunities to benefit from Saudi Arabia’s experience in the energy sector and noted continued cooperation in defense production.
Looking ahead, he said Pakistan aims to recalibrate its relationship with Saudi Arabia toward trade and investment rather than reliance on aid.
“Our prime minister has been very clear that we want to move this entire discussion as we go forward from aid and support to trade and investment.”
