The average growth rate in the Gulf countries is expected to be about 2% for 2016 and remain at this level for the coming year, a decline from nearly 4% in 2015.
The prediction from ratings agency S&P Global Ratings takes into account the low oil price, fiscal consolidation and reduced liquidity in the banking sector.
“Governments across the region implemented expenditure cuts and subsidy reforms which have weakened both corporate and household activity,” said the agency in the latest of its twice-yearly reports on Middle East and North African sovereign ratings.
The agency’s negative assessment prompted it to lower Bahrain’s credit rating in December. Bahrain now has a ‘BB-‘ rating, which is four notches lower than it had at the start of 2015.
Along with Egypt, Iraq, Jordan and Lebanon, Bahrain is considered speculative grade, while the remaining eight MENA sovereigns rated by the agency are considered investment grade.
The agency has also lowered its outlooks for Oman and Sharjah from stable to negative.
“Economic activity in the oil and gas sector was weak across most of the GCC,” reads the report. “Absent a sharp increase in oil prices – which is not our base case – we expect further weakness in the hydrocarbons sector over 2017.”
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