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GCC banks' asset quality expected to see slight decline in 2022

GCC banks' asset quality expected to see slight decline in 2022
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Mubasher: GCC banks' asset quality indicators are expected to record a slight decline in 2022 because of regulatory forbearance measures that have enabled the corporate sector to tackle the coronavirus (COVID-19) repercussions, S&P Global Ratings announced.

The GCC economies are witnessing a recovery from the COVID-19 pandemic, driven by higher oil prices, supportive government spending, and normalisation of non-oil activity, according to the rating agency's report "GCC Banking Sector Outlook: On The Recovery Path In 2022".

The report referred that GCC banks are set to benefit from a regional economic recovery during 2022.

In addition, lower global liquidity is forecast to have little impact on GCC banks because of their strong net external asset positions or limited net external debt positions. 

The nonperforming loan ratio will increase in the next 12-24 months without overpassing 5%, compared to 3.7% at 30 September 2021.

Strong capitalisation and government support will also continue to strengthen regional banks' creditworthiness.

Meanwhile, corporates have started to register a gradual boost; however, certain sectors, including aviation and hospitality, continue to witness pressure.

The increase the real estate prices in Dubai may not last long due to the structural oversupply of residential property that could lead to a weak recovery.