2016 to show improvements in GCC debt market-PwC

Tuesday, Jan 26, 2016

Dubai: The GCC debt market is expected to show signs of improvement as government tries to plug the deficit, PricewaterhouseCoopers (PwC) said in a statement.

Prices of crude oil, on which most of the GCC countries derive its revenues from, have fallen 80 per cent from a high of close to $150 per barrel hit in 2008. This has prompted most of countries to issue conventional bonds and sukuks to plug in widening budget deficits.

“We should expect 2016 to show improvements in the debt market particularly sovereign issuances as the continued slump in oil prices widens deficit gaps. Governments in the Gulf will need to raise funds and tapping into the debt market is one way of doing so. The concern however is the potential increase in supply which may result in an increase in the cost of borrowing,” Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East region said in a statement.

In the IPO front, total proceeds in 2015 stood at $1.4 billion from 6 deals compared to $10.8 billion raised from 16 deals in 2014.

“The outlook for 2016 remains uncertain and until the factors I just mentioned begin to recover, it will be difficult for investors and issuers to regain confidence and come back to the market,” Drake from PwC.

Staff Report