LONDON: The outlook for Oman’s banking sector was cut to negative by Moody’s Investors Service to reflect a reduction in the government’s ability to support the country’s banks, weaker economic growth and tightening liquidity.
“The Omani government has a reduced capacity to support banks in case of need, owing to fiscal deterioration,” said the credit ratings agency in a statement on Tuesday.
“We expect a softening in Oman’s operating environment, with fiscal consolidation amid prolonged oil price weakness weighing on economic growth,” said Mik Kabeya, analyst at Moody’s.
“This will weigh on credit growth, which we forecast to fall to five percent in 2017, down from 10.1 percent in 2016.”
The change from stable comes after Moody’s last month cut the rating of the sultanate to the second-lowest investment grade, saying its progress toward addressing structural vulnerabilities to a weak oil price environment has been more limited than expected.
A halving of crude prices since 2014 left Oman with a budget gap of almost 22 percent of economic output in 2016, according to the International Monetary Fund.
Slower economic growth will drive a marginal weakening in problem loans to around 3 percent of gross loans in 2017-18, from 2.1 percent at end-March 2017, according to the rating agency.
“Funding and liquidity conditions will remain tight, as high domestic government borrowing limits funds available to lend to the wider economy,” Moody’s added.
Nonetheless, the government’s international bond issuances, slower credit growth and higher oil prices will moderate the pressure.
Oman in August signed an agreement for $3.5 billion in loans from Chinese financial institutions and in May raised $2 billion through an Islamic bond sale, which lured orders for more than three times the issue size.
Moody’s cuts Oman banking outlook on weaker govt support, poor growth
Moody’s cuts Oman banking outlook on weaker govt support, poor growth
Qatar’s non-oil business growth steady in December; Lebanon’s PMI at 8-month high
- Qatar’s labor market was a key driver of the country’s overall progress in business conditions
- S&P Global added that activity levels across Lebanon’s private sector economy fell in December
RIYADH: The growth of non-oil business activities in Qatar was steady in December, with the country’s purchasing managers’ index remaining stable at 52.9, unchanged from November, an economy tracker showed.
The latest report released by Qatar Financial Center and compiled by S&P Global said that the headline PMI figure for the fourth quarter of 2024 stood at 52.9, up from 52.0 in the previous three months and above the long-run survey average of 52.3 since April 2017.
According to the PMI survey, Qatar’s labor market was a key driver of the country’s overall progress in business conditions in December, with employment and wage increases reaching some of the highest levels on record.
The strong growth in non-energy business activities aligns with the broader economic diversification efforts across Gulf Cooperation Council nations, which continue to reduce reliance on oil revenues.
Earlier this month, S&P Global revealed that Saudi Arabia’s December PMI hit 58.4, driven by a sharp increase in new orders. The Kingdom’s PMI has remained above the neutral 50 mark since September 2020, indicating substantial expansion in the non-oil private sector.
In the UAE and Qatar, the PMI for December stood at 55.4 and 54.1, respectively.
“The headline PMI was unchanged at 52.9 in December, remaining above the long-run trend level of 52.3 and indicating a solid improvement in business conditions in the non-energy sector,” said Yousuf Mohamed Al-Jaida, CEO of QFC Authority.
According to the report, employment and wages have risen more quickly in Qatar’s non-energy business sector than at any other time in survey history, which reflects efforts to raise output, improve services, win new business, and address outstanding workloads.
Even though wage pressures remained strong in December, overall input price inflation eased further from October’s four-year high.
The survey added that Qatari firms continued to hold an optimistic outlook for the next 12 months in December, albeit slightly easing from November.
According to the analysis, Qatar’s Financial Services Future Activity Index rose from 62.1 in November to 68.3 in December, well above the long-run series trend of 63.6.
“The outlook for 2025 is strongly positive, continuing to support a booming labor market. New business growth generated a renewed rise in outstanding work during December, and companies continued to build inventories in expectation of sales growth in the coming months,” added Al-Jaida.
Business confidence in Lebanon rises
In a separate report released by BLOMINVEST Bank, compiled by S&P Global, the PMI of Lebanon hit an eight-month high in December, reaching 48.8, up from 48.1 in November.
The survey revealed that companies recorded their most optimistic assessment of the 12-month outlook in December as the Israel-Hezbollah ceasefire buoyed sentiment.
S&P Global added that activity levels across Lebanon’s private sector economy fell in December, although the pace of decline cooled to the softest seen since March.
“The BLOM Lebanon PMI for December 2024 improved for the second month in a row from the 44-month low in October (45.0) to record 48.8, as slower declines in new orders and new export orders resulted in a softer output contraction,” said Helmi Mrad, research analyst at BLOMINVEST Bank.
He added: “It is interesting to note that the surveyed companies were optimistic regarding the 12-month outlook, with the Future Output Index recording an all-time high of 61.8. This optimism is due to the ceasefire agreement between Hezbollah and Israel.”
According to the survey, the decline in new export business also cooled sharply in December, with the contraction being the slowest in 10 months. This trend also signaled a marked easing of the contraction in international client demand for Lebanese products.
Up to 50% of deep tech startups in Saudi Arabia focus on AI, IoT — report
RIYADH: Up to 50 percent of deep tech startups built in Saudi Arabia are working on artificial intelligence and the Internet of Things, a new report revealed.
Released by the Ministry of Communications and Information Technology, in partnership with King Abdullah University of Science and Technology and in collaboration with Hello Tomorrow consultancy firm, the document indicated that there are over 43 high-growth startups driving innovation in the Kingdom, collectively securing more than $987 million in funding.
This aligns with the National Strategy for Data and AI goals to position Saudi Arabia among the top 10 countries in the open data index and among the top 20 countries in peer-reviewed Data and AI publications by 2030.
It also meets with the strategy’s objective of securing SR30 billion ($7.9 billion) cumulative foreign direct investment and SR45 billion local investment in data and AI in the Kingdom by 2030.
“The deep tech startups that have originated in Saudi Arabia are currently in their early stages of development, but the ecosystem is already attracting mature international companies,” the report said.
On the $987 million secured funding in 2022, the report said this was primarily fueled by a rapidly expanding funding ecosystem, which was ranked in the Middle East and North Africa’s top three for funding and deals.
The report further disclosed that 104 active startup investors registered in the Kingdom in 2023, a 41 percent increase from 2018.
“This expansion is highly dependent on public funds, as the government is committed to nurturing tech startups and scaleups,” the reports said.
It added that the number of researchers in Saudi Arabia has risen by 75 percent since 2015, thereby cementing the nation’s commitment to advancing research and development.
“The country is expanding its research infrastructure to accommodate 140,000 researchers by 2030, marking a sevenfold increase from the current 20,000 researchers in the country,” the report said.
The report tackles the current state and future opportunities of the deep tech ecosystem in the Kingdom as well as key initiatives supporting the goals and objectives of Saudi Vision 2030.
It also seeks to shed light on the prospects and potential in this vital sector which is recognized as a cornerstone for advancing the digital economy and sustainable development as a whole.
GCC, Canada discuss strengthening ties across key sectors
RIYADH: The Gulf Cooperation Council and Canada have reaffirmed their commitment to strengthening international development and investment ties following high-level talks between officials.
On Jan. 6, GCC Secretary General Jasem Al-Budaiwi met with Canadian Minister of International Development Ahmed Hussen to discuss improving bilateral cooperation.
According to a statement from the GCC Secretariat, the talks explored opportunities to deepen alliances between the economic bloc and the North American country, including education and renewable energy.
Within the GCC, countries including Saudi Arabia are actively deepening their relations with Canada, as demonstrated by the restoration of diplomatic ties in May 2023 after a five-year hiatus.
The statement from the GCC Secretariat added that the Jan. 6 discussions also addressed pressing regional and international issues, highlighting the significance of dialogue and strategic partnerships in fostering security and global stability.
“At the conclusion of the meeting, both sides reaffirmed the significance of joint cooperation to enhance sustainable development efforts at both regional and global levels, contributing to greater stability in the region and beyond,” the statement said.
At the end of December, Saudi Arabia’s Minister of Economy and Planning Faisal Al-Ibrahim held talks with Canadian Ambassador Jean-Philippe Linteau at his department’s headquarters in Riyadh, according to the Saudi Press Agency.
Economic cooperation was the focus the meeting as relations between the nations continue to progress.
Bahrain’s non-oil sector fuels 2.1% economic growth
RIYADH: Bahrain’s economy expanded by 2.1 percent year on year in the third quarter of 2024, driven by strong performance in its non-oil sectors, official data showed.
According to data from the Ministry of Finance and National Economy, non-oil sectors grew 3.9 percent during the period, accounting for 86.4 percent of real gross domestic product.
Key contributors included the information and communication sector, which surged 11.9 percent year on year, supported by increased mobile and broadband subscriptions.
Bahrain’s third-quarter growth mirrors positive trends across the Gulf Cooperation Council, with Saudi Arabia’s GDP rising 2.8 percent and Qatar’s advancing 2 percent, driven by ongoing economic diversification.
Despite these gains, Bahrain’s economy faced challenges in the oil sector, where activities contracted by 8.1 percent year on year, contributing to a 0.9 percent decline in nominal GDP.
However, non-oil sectors fared well, with the country’s financial and insurance activities performing strongly, growing by 5.8 percent, while electronic funds transfers increased by 13.7 percent year-on-year.
Manufacturing expanded by 4.2 percent, aided by higher production at the Bapco Refinery, while wholesale and retail trade grew by 2.1 percent, bolstered by a significant rise in e-commerce transactions.
In contrast, the oil sector faced headwinds due to maintenance activities at the Abu Sa’afa field and declining global oil prices. This resulted in a year-on-year contraction of oil activities by 8.1 percent in real terms, while average daily oil production from the Abu Sa’afa field fell by 11.5 percent year on year.
Trade and investment activities also presented mixed results. The current account surplus narrowed by 54.5 percent year on year to 148.6 million Bahraini dinars ($394.2 million), largely due to a 19.2 percent decline in the value of oil exports.
Non-oil exports, however, saw modest growth of 1.1 percent, with base metals and mineral products leading the category. Foreign direct investment stock increased by 3.5 percent year on year, reaching 16.5 billion dinars. The financial and insurance sector remained the dominant contributor, accounting for 67.3 percent of the total foreign direct investments.
Development projects in various sectors continued to advance during the quarter. The Bapco Modernization Program, completed in December, increased refinery capacity by 42 percent, representing the largest capital investment in Bapco’s history.
In the tourism sector, four new five-star hotels and the “Hawar Resort by Mantis” were inaugurated, enhancing Bahrain’s hospitality offerings.
The healthcare sector saw the construction of a new rehabilitation center in Al Jasra, while the Aluminum Downstream Industries Zone was launched as part of Bahrain’s Industrial Strategy.
Monetary and financial indicators reflected positive trends. The broad money supply expanded by 6.1 percent year on year, supported by a 15.6 percent increase in government deposits.
Total loans provided by retail banks grew by 4.9 percent year on year, with personal loans comprising nearly half of the total. The labor market recorded a 1.7 percent increase in the number of Bahrainis employed in the public and private sectors, reaching 153,842.
Recruitment under the Economic Recovery Plan met 98 percent of its annual target for 2024, while over 13,679 Bahrainis received training.
Bahrain’s capital markets also performed well, with the Bahrain All Share Index closing the third quarter at 2,012.77 points, a year-on-year increase of 3.8 percent. The Bahrain Islamic Index recorded even stronger growth, rising by 10.1 percent. Market capitalization increased by 2.4 percent, reaching 7.8 billion dinars.
In global competitiveness rankings, Bahrain retained its position as the freest economy in the Arab world, ranking 34th globally in the Economic Freedom of the World report.
The nation also climbed eight places to rank 30th in the IMD World Digital Competitiveness Ranking, reflecting significant progress in adopting and leveraging digital technologies.
Riyad Bank issues SR-denominated Tier 1 sukuk
RIYADH: Riyad Bank has commenced the issuance of its additional Tier 1 sukuk under its SR10 billion ($2.66 billion) Additional Tier 1 Capital Sukuk Program via a private placement in the Kingdom.
In a statement to Tadawul, the lender, one of the largest financial institutions in Saudi Arabia, said that the terms of the offer and the value of the sukuk would be determined based on market conditions.
The financial institution added that the offering, which commenced on Jan. 7, will run through Jan. 16, with a minimum subscription limit of SR250,000.
Sukuk, also known as an Islamic bond, is a Shariah-compliant debt product through which investors gain partial ownership of an issuer’s assets until maturity.
According to the statement, the bank has mandated Riyad Capital as the sole lead manager in relation to the offer and issuance of the sukuk.
The financial institution added that it will announce any other relevant material developments in due course.
The steady issuance of sukuk happening in the Kingdom falls in line with the views shared by Fitch Ratings in a report in October, which said that the distribution of these Islamic bonds is expected to grow in 2025, driven by US Federal Reserve rate cuts.
According to Fitch, interest rates are expected to be at 3.5 percent in 2025, resulting in a boost in sukuk issuances in the short term.
In December, Fitch Ratings affirmed Riyad Bank’s long-term issuer default rating at A- with a stable outlook.
The US-based agency said that the A- rating of the financial institution is attributed to the support it receives from Saudi Arabia’s government.
The report added that Saudi authorities’ strong ability and willingness to support domestic banks irrespective of size, franchise, funding structure, and level of government ownership also played a crucial role in the strong rating of Riyad Bank.
According to Fitch, an A- rating denotes expectations of low default risk and a strong ability to pay financial commitments.
In October, Riyad Bank announced that its net profit for the first nine months of 2024 reached SR7.06 billion, representing a rise of 16 percent compared to the same period of the previous year.
In December, an analysis by Kamco Invest projected that Saudi Arabia is expected to witness the greatest share of bond and sukuk maturities in the Gulf Cooperation Council region from 2025 to 2029 to reach $168 billion.
