Banks in Saudi Arabia stand to benefit from the latest shock caused by the conflict in Ukraine, while those in other emerging markets will face new risks as a result of the war, according to ratings agency Moody’s.

In a report on emerging market banks released today, the agency said the kingdom’s banks will benefit from rising oil prices, which will boost tax revenues, increase liquidity and lift economic growth, allowing the government to start unwinding five years of fiscal deficits.

“Higher oil revenues will also buoy investor confidence and increase flows of deposits into the banking sector.

“We expect real GDP to surge to 7.2 percent in 2022 and 4.5 percent in 2023, after tepid economic expansion in the years before the pandemic,” the agency said in its report.

Moody’s said banks in many emerging markets were showing early signs of recovery from pandemic-related economic shock until Russia’s invasion of Ukraine sent new shockwaves around the world, causing spiraling food and energy prices and inflation to hit its highest levels in decades.

“For banks, this will slow business and increase loan losses. Some are better placed to deal with the latest crisis than others,” the report said.

Moody’s said banks in Turkey will see operating conditions continue to deteriorate as the war compounds the country’s already very high inflation. India, Indonesia and Nigeria will continue their recovery but will face new risks related to the war, the report said, including inflation, interest rate hikes and prolonged supply constraints. 

(Reporting by Imogen Lillywhite; editing by Seban Scaria)