Mubasher: Higher oil prices and continued public spending support the stable 2018 outlook on non-financial companies in the countries of the Gulf Cooperation Council (GCC), according to a report by Moody's Investors Service.
“Conversely, the 2018 outlook for companies in both Turkey and South Africa is negative,” the report indicated.
"Improving oil prices, which are narrowing fiscal deficits, as well as an ongoing commitment to public spending and a supportive stance towards government-related issuers will underpin the stable outlook on GCC companies over the next 12 months," said vice president and senior analyst at Moody's, Rehan Akbar.
"Limited clarity on policy direction and on the pace of implementation of structural economic reforms, as well as political risks and high currency volatility drive the negative 2018 outlook for Turkish companies. Similarly, the negative outlook for firms in South Africa reflects continued political and policy uncertainty, and depressed business and consumer demand," he added.
The report also noted that GCC corporates will continue to benefit from strong competitive positions and government support, adding that oil prices above $50 per barrel will allow countries with large fiscal buffers and small populations, such as the UAE, Kuwait, and Qatar, to implement fiscal reforms at a slower pace than their regional peers.
Fewer growth opportunities will drive GCC companies toward consolidations and acquisitions outside the region, as well as investments in increasing vertical integration, and corporate focus on costs.
GCC mature state-owned corporates are increasingly looking to diversify funding sources, which could lead to an uptick in capital market activity, the report further explained.
Saudi Arabia’s policies to increase workforce participation of its citizens will open up opportunities for certain sectors, but create challenges for others, while
Meanwhile, in Turkey, corporate growth will be moderately lower next year after the accommodative fiscal policy that temporarily stimulated the Turkish economy in 2017 comes to an end, with the export-oriented manufacturing companies in Turkey expected to see growth opportunities as demand in Europe increases, supported by a weaker lira.
Moody’s also noted that in South Africa, the fragile macro environment as well as political and policy uncertainty heighten downside risks for companies in the country. However, rated firms will remain resilient, but not immune, largely thanks to diversification, market dominance, and healthy credit profiles.
The outlook for Turkey and South Africa in the upcoming year is negative
