Profitability and credit growth of GCC banks set to remain strong in 2024
Profitability and credit growth will remain strong for most banks in the Gulf Co-operation Council this year, supported by robust credit demand from the non-oil sector and economic diversification programmes across the region, a report has said.
The UAE and Saudi banking systems are poised to continue their growth above the rest of the region, S&P Global Ratings said in its GCC Banking Sector Outlook 2024 report.
Overall, the credit rating agency expects banks across the GCC to deliver strong return on assets supported by the robust macroeconomic environment.
“Non-oil growth should remain particularly dynamic in Saudi Arabia and the UAE,” said Benjamin Young, an analyst at S&P.
“The economic environment will support credit demand and credit growth … This will support their profitability.”
Banks in the six-member bloc are benefitting from continued economic growth momentum despite global headwinds and geopolitical uncertainties.
Oman’s economic recovery has progressed: IMF
Oman’s economic recovery continues to be broad-based, sustained by impact-driven structural reforms and policies that have yielded positive results in, among other areas, reviving employment growth, moderating inflation, paring public sector debt, and securing upgrades of its sovereign credit ratings.
According to the latest report of the International Monetary Fund (IMF), economic output grew by 4.7 percent in 2022, up from 3.1 percent a year earlier, driven primarily by a strong expansion of the oil & gas sector.
Non-hydrocarbon growth, however, slipped to 1.2 percent in 2022 (down from 1.9 percent in 2021), weighed down largely by a contraction in the construction sector.
Pak-UAE economic, logistical landscapes set to reshape
Pakistan and the United Arab Emirates (UAE) have recently forged significant agreements exceeding $3 billion, marking a transformative collaboration in various sectors such as railways, economic zones, and infrastructure. These pivotal pacts are set to create a dedicated freight corridor, a state-of-the-art multi-modal logistics park, and advanced freight terminals.
Dr. Javed Iqbal, a Fulbright Scholar, shared these insights with WealthPK, emphasizing the strategic nature of these agreements and their potential to reshape the economic and logistical landscapes of the two nations.
He added that the Dubai-based multinational logistics company – DP World – will spearhead infrastructure enhancements at Qasim International Container Terminal – a pivotal trade gateway for Pakistan. DP World also plans to develop an economic zone adjacent to the terminal, solidifying its commitment to the region.
Non-oil business activity in Saudi Arabia and UAE grew in January
Business activity in the non-oil private sector economies of Saudi Arabia and the UAE continued to expand in January, albeit at a slower pace, amid continued growth momentum in the Arab world’s two largest economies.
The seasonally adjusted Riyad Bank purchasing managers’ index – a crucial gauge of the kingdom’s non-oil economy – slipped to 55.4 in January, down from 57.5 in December.
Though the headline PMI was at the lowest level in two years, the upturn remained strong overall and widespread across the monitored sectors, as it remained well above the neutral 50 mark that separates growth from contraction.
New business intake drove activity, but the rate of sales growth eased as several businesses reported slowing momentum amid competitive pressures.
Qatar remains strong in the face of new economic challenges
Qatar is considered by many observers to be an economy in transition, moving slowly from a heavy reliance on oil and gas to a more balanced knowledge- and resource-based economy. In the short term, however, the country is facing the dual challenge of having to rein in spending at a time of low oil prices while also continuing with huge infrastructure expenditure as the country gears up to host the FIFA World Cup in 2022.
For the first time in 15 years, Qatar is expected to post a budget deficit in 2016, of about $12.8bn, in large part due to the continuing low price of oil on the global market. Despite this, and because of the country’s strong liquefied natural gas revenues, as well as its high level of infrastructure spending and its growing non-hydrocarbon sector, the economic situation is anything but dire.
IMF: prospects for Saudi economy more positive, expected growth of 5.5pc in 2025
The International Monetary Fund (IMF) has revised its expectations for economic growth in Saudi Arabia, indicating a positive outlook for the Kingdom’s economy. The IMF now predicts a growth rate of 5.5 percent in 2025, an increase from its previous estimate of 4.5 percent issued in October 2023.
These revisions were made based on the data published in the IMF’s report ‘Updates on Global Economic Prospects’ in January 2024, which highlighted the optimistic outlook for the Saudi economy’s performance and strength despite the risks and challenges present in the global economic landscape.
This positive outlook confirms the growth and prosperity of the Saudi economy, which is being driven by strong leadership both regionally and internationally.
GCC economies to get boost from fed move
With the US Federal Reserve holding rates again and Chairman Powell effectively implying that the US economy is undergoing a soft landing, the effect is likely to be positive for the GCC economies, an expert said.
The Fed move implies that addressing inflation is feasible without triggering a recession or substantial spikes in unemployment. Powell’s assertion finds backing in the ongoing growth of the US economy, low unemployment rates, and robust wage levels. His statement underscores the intricate interplay between inflation and unemployment, especially in a year marked by heightened uncertainties, including rising geopolitical tensions and the upcoming presidential elections. Historically, such election years tend to exert more pressure on the equities market than the post-election period.