DUBAI (S&P Global Ratings) --S&P Global Ratings foresees a resilient performance in 2023 among corporate and infrastructure issuers in the Gulf Cooperation Council (GCC) countries, despite higher interest rates and inflation, less-accommodating debt capital markets, and our expectation of slower economic growth.

The report "GCC Corporate And Infrastructure Outlook 2023: Resilience Amid Slower Growth," is available on RatingsDirect.

"Given stable earnings profiles, strong balance sheets, and healthy funding and maturity profiles, we expect GCC corporate issuers to comfortably navigate through 2023," said S&P Global Ratings credit analyst Rawan Oueidat.

"Most companies exhibit a balanced debt composition with about half of their funding exposed to floating interest rates, and the rest based on fixed rates. However, a handful of companies have higher floating rate exposure, making them more vulnerable to further interest hikes, especially for those operating in cyclical industries that may suffer from economic headwinds," noted credit analyst Tatjana Lescova.

Sofia Bensaid added: "Similarly, our rated infrastructure projects' operational performances are expected to remain robust and to generate strong cash flow to fully service or repay all their respective senior debts."

While OPEC-related oil production cuts will affect GDP growth, our oil price assumptions remain relatively high, with the Brent oil price averaging $90 per barrel in 2023 and $80 in 2024. "Hydrocarbon prices in 2023 and 2024 should support intrinsic credit quality for the oil and gas sector in the region," said Ms. Oueidat.

GCC corporates' operating performance accelerated in 2022 accompanied by positive rating actions, largely thanks to improvements in the regional oil and gas-based economies. In the meantime, some rated government-related entities also saw positive rating actions following similar actions on several rated sovereigns in the region. "As a result, 75% of our rating outlooks are stable, while over 20% are on a positive outlook, which reflects our expectations of resilience for the rated corporate and infrastructure issuers in 2023," added Sapna Jagtiani.

"We do not expect rated infrastructure issuers to refinance their long-term debt given the high interest rate environment," noted Ms. Bensaid. "Similarly, we have seen a slowdown over 2022 for infrastructure first-time issuers, which we foresee recovering progressively over the course of 2023-2024 as long-term borrowing rates stabilize" .


This report does not constitute a rating action.

Prerna Agarwal
Senior Consultant
Hanover Middle East
Office 207/208, Thomson Reuters Building 1
Dubai Media City, Dubai, UAE