GCC banks stable thanks to state spending

Moodys websiteGovernment spending will support banks in the Gulf countries and help them survive the current period of low oil prices.

Ratings agency Moody’s, which made the prediction, forecast credit growth of up to 10% as government borrowing offsets declines from the private sector.

“Despite the headwinds generated by low oil prices, we expect a broadly supportive operating environment for GCC banks in 2016 due to regional governments’ commitment to their counter-cyclical spending policies,” says Khalid Howladar, a senior credit officer at Moody’s based in Dubai.

“Events such as the UAE Expo 2020 and World Cup Qatar 2022 are providing anchors for capital expenditures in addition to other key regional infrastructure projects.”

However, the agency said liquidity would tighten and predicted funding costs would rise as credit growth outpaces deposits.

The price of a barrel of Brent crude recently increased above $50 after an agreement by Opec to cut production levels. Prior to mid-2014, a barrel cost more than $100.

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