Standard & Poor's credit ratings agency expected that the economic recovery from the “Coronavirus” crisis in the Gulf region will be slow, which will negatively affect the banking sector in the region.
The GCC states suffered from a severe recession last year, with vital non-oil sectors such as hospitality, trade and real estate affected by the "Covid-19" pandemic, while states' revenues were affected by the drop in oil prices.
According to the ratings agency, events such as the "Dubai Expo" scheduled for this year and the FIFA World Cup in Qatar next year, along with the recovery of the oil market, will support growth somewhat, but it will remain below its historical levels.
Standard & Poor's revealed that most countries will not return to nominal GDP levels for the year 2019 before 2023. The recovery of the aviation, tourism and real estate sectors will take time, and thus these factors will affect the quality of banks' assets, and bad loans are expected to increase, in addition to implications for profitability, as a number of banks are expected to suffer losses in 2021.
According to the agency, the measures implemented by most central banks in the region are supportive of liquidity, but they do not eliminate credit risk or reduce it in bank balance sheets.
Source (Al-Rai Newspaper-Kuwait, Edited)
