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Bond issuances set to surge

Sovereign ratings stabilise following a number of downgrades

Gulf News

Dubai: Debt issuances by GCC governments and private sector entities are expected to surge in 2017.

Growing need to fund the budget deficits resulted in a significant surge in both domestic and international debt issuances by GCC sovereigns last year. “While this trend is expected to continue we expect more regional corporates, especially infrastructure players to tap debt market this year. However, we do not anticipate a huge surge in corporate issuance this year,” said Karim Nassif, Associate Director, Infrastructure Finance of S&P.

S&P estimates that the GCC will need around $275 billion (Dh1.01 trillion) of financing in 2017-2019 and assume that, on average, around 50 per cent of this amount will come from debt issuance.

While the conventional issuance both in domestic and international markets are expected to dominate, the rating agency expects sukuk issuance to remain relatively flat this year.

While the weakness in economic activity resulting in low GDP growth across GCC has resulted in a number of downward revisions in the ratings of GCC sovereigns, S&P said the rating revisions have settled with stable outlook for most sovereigns except Oman.

Although recent oil price recovery has helped the government finances, from a rating perspective the upturn is limited.

“We expect average GCC GDP growth to slow to about 2 per cent in 2016, compared with closer to 4 per cent in 2015 and to remain around these relatively weak growth rates in 2017,” said S&P credit analyst Trevor Cullinan.