Dubai:The Middle East’s credit ratings are expected to come under further pressure due to falling oil prices, according to Fisch Asset Management, which said the region is “just in the beginning of a downgrade trend”.

Philipp Good, head of portfolio management at Fisch, a credit research house based in Zurich, said he expected to see some downgrade pressure especially in the GCC. Speaking at a media round-table in Dubai on Monday, he said such pressure would also be seen in the UAE, which has been relatively resilient compared to the rest of GCC countries.

The comments echo a similar sentiment expressed by Moody’s Investor Services in March this year when it placed all the GCC countries in the review for a possible downgrade.

This was the first action to be taken by the ratings agency since 2010, with the review set to be concluded by the end of May, with the exception of Bahrain.

Other international organisations such as the International Monetary Fund (IMF) have said that the Middle East’s governments are expected to face a total deficit of $900 billion in the next five years.

Fisch’s Good said that in order to counter that, governments could raise a third of the $900 billion from debt issuance, a third from privatisation, and a third from foreign reserves.

“I would not recommend using all the cash you have. I would rather recommend [governments] go to the bond market … The investor appetite is huge because we have a search-for-yield environment.

In the next five years, I would expect $300 million to $400 million to come into the market [from the Middle East], which would translate to $60 million to $70 million per year, so we will see a big pick up in issuance in the market,” he said.

Good said he expected 80-90 per cent of the figure expected to come out of the GCC countries alone. Such debt issuance will also help attract more investors into the region’s markets, and hence, increase the liquidity in secondary markets.

“Middle East Countries have the capacity to lever up. The region has the highest average ratings globally, but budget deficits need to be addressed through a combination of investment and reform. The funding of these deficits can be achieved at a sovereign level or among government related entities. Privatisation will also play a key role,” he said.

Another $200 billion to $300 billion could easily be raised through privatisation, according to Good.