RIYADH: Gulf Cooperation Council banks are well equipped to manage potential funding outflows in the event of ongoing regional conflicts thanks to strong liquid assets, an analysis has found.

Credit rating agency S&P Global did warn in its report, however, that financial institutions may require help from governments if their assets cannot be converted to cash easily.

Stress-tests from the US-based agency showed that modest and moderate developments in geopolitical tensions across the region will not significantly impact its banking sector.

In contrast, high and severe scenarios could result in 30 percent outflows of non-resident deposits. 

Earlier this month, S&P Global issued an additional report cautioning that an escalation of the ongoing conflict in the Middle East could undermine sovereign credit ratings across the region if it heightened. 

The credit rating agency added that a potential amplification in the coming months could impact regional governments’ economic outlook and financial stability, with broader implications for creditworthiness depending on the conflict’s trajectory. 

“Under high and severe stress, banks appear capable of handling potential funding outflows by using their liquid assets. Government support could be necessary if assets are less liquid than we expect. If asset quality stress is as severe as we project, many of the top 45 banks in the region could display losses,” said S&P Global in the latest report. 

It added: “The results of our hypothetical stress test show that most banking systems in our sample will be resilient if regional conflicts escalate and investor confidence declines.” 

S&P Global said that the governments of Saudi Arabia, the UAE, Qatar, and Kuwait are highly supportive of their banking sector, meaning that financial institutions in these nations will receive substantial support if necessary. 

The report added that the potential outcomes of the current situation are hard to predict.

According to the analysis, potential external funding outflows of $221 billion from the region in the high and severe stress scenarios will be primarily concentrated in Qatar and the UAE, followed by the offshore banking sector in Bahrain, because of the significant gross external debt of the banking systems in these countries. 

The agency revealed that assumed external funding outflows range from a limited $3.9 billion in Oman to a manageable $30 billion in Saudi Arabia.

The report suggested that banks may need to liquidate some of their investment portfolios or park them at central banks against liquidity to ride out withdrawals. 

In September, a separate report by S&P Global said that banks in the GCC are set for strong performance through the remainder of 2024, propelled by a 10.4 percent increase in lending during the first half of the year. 

According to the credit rating firm, this lending growth will be driven by robust activity in non-oil sectors across Saudi Arabia and the UAE.

RIYADH: Qatar’s consumer price index for September reached 107.82 points, up 0.82 percent year on year, driven by a rise in recreation and culture group costs, new figures revealed.

Data released by the Gulf country’s National Planning Council showed that the increase in CPI is primarily due to the prices rising in five groups, namely: “recreation and culture” by 12.57 percent, “miscellaneous goods and services” by 6.24 percent, “communication” by 3.96 percent, “restaurants and hotels” by 2.74 percent, and “education” by 1.04 percent.

This aligns with projections that Qatar’s average inflation rate is expected to continuously decline by 0.6 percentage points between 2024 and 2029, according to data from Statista, a German platform specializing in data analysis and visualization.

According to the forecast, in 2029, inflation will have decreased for the seventh consecutive year to 1.96 percent.

The data further reported a decrease in price levels in “housing, water, electricity and other fuel” by 4.17 percent, “food and beverages” by 3.3 percent, “health” by 1.63 percent, “furniture and household equipment” by 1.52 percent, “clothing and footwear” by 1.26 percent, and “transport” by 0.34 percent. 

According to the newly released data, no changes were recorded on “tobacco.”

In August, an analysis by Standard Chartered said that Qatar is on track to restore government revenues to pre-2014 oil price shock levels and double its economy by 2031. 

In its report, the UK-based bank said this recovery is a testament to the country’s strategic positioning within the global energy market and its ongoing efforts for economic diversification. 

The analysis done at the time also highlighted that Qatar is currently the sixth-largest gas producer in the world and holds the third-largest reserves of fossil fuel, allowing the nation to leverage rising hydrocarbon prices effectively.

Standard Chartered said the Gulf country’s non-oil economy is also growing steadily, contributing to two-thirds of the country’s gross domestic product.

Standard Chartered further said that Qatar’s strong growth in the liquefied natural gas sector will also contribute to the nation’s economy in the coming years.

The study also underscored the importance of international financial institutions and foreign investments in driving Qatar’s growth in the non-oil private sector, which includes areas such as tourism, manufacturing, finance, and logistics.

Qatar significantly boosted its global profile in the economic landscape after hosting the FIFA World Cup 2022, the International Monetary Fund said in July, while in April the World Bank forecasted the country’s economy would grow by 2.1 percent in 2024, before accelerating to 3.2 percent in 2025.