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Dubai will be the first
Despite the fact that 30 per cent of Moody's corporate issuers in the
GCC are on negative outlook watch, a majority of them in Dubai, the
agency believes the emirate is the best-placed economy in the region to
come out of the crisis once things improve on a global level.
"Dubai
has been the most dynamic economy in the region, and is likely to be
the first to rebound once global markets recover," Philipp Lotter,
Senior Vice-President, Moody's Investors Service in Dubai, told Emirates Business.
"The
absence of a sovereign wealth fund/oil fund is the primary reason why
the global recession has a far greater impact on Dubai than other
economies that directly benefit from oil," Lotter said citing reasons
for Dubai's dismal run of late.
The rest of Moody's corporate
issuers across the GCC, said Lotter, were stable and some even have a
positive outlook. "Among the rest of our issuers, all our corporate
issuers in Saudi Arabia are on a positive outlook, owing to strong
sovereign positive expectations. Furthermore, all our Abu Dhabi issuers
are on a stable outlook while a majority of Moody's issuers in Qatar
are stable," he said.
The global recession and a decline in oil
prices have had a negative impact on the economies of the region.
However, Moody's believes the region's banks have been little affected
and therefore doesn't see many ratings downgrades for the sector.
"Rated
banks in the Middle East and Africa have so far been little affected by
the different phases of the global crisis that has unrolled over the
past 20 months," the ratings agency said in a recent report.
"Reflecting
the developments, we have taken a few rating actions, and we expect to
make a few more rating adjustments. Unless conditions deteriorate
beyond our base case scenario, however, MEA banks will survive the
crisis with relatively few rating downgrades," it said.
Analysts
believe spectacular regional economic growth of the past few years
meant that banks from the Middle East did not have many incentives to
venture abroad or, especially into exotic financial instruments,
something that led their global counterparts into trouble.
"Less
than 20 per cent of rated banks had material exposure to toxic assets,
such as structured investment products, or suffered losses from foreign
securities holdings," the Moody's report said.
Moreover, banks
in the region have strong local funding bases and have not had to
depend on now-crunched foreign liquidity, something that has worked in
their favour. "In general, funding and liquidity supports provided by
the authorities have sustained the systems and avoided collapses," said
Moody's. "However, the ensuing economic slowdown is now hurting the
real economies and is leading to recession-induced loan problems that
are expected to continue into 2010," it said.
Meanwhile, Bank of
America-Merrill Lynch yesterday reiterated that the UAE, followed by
Saudi Arabia, will benefit the most from an uptrend in global economic
activity, higher oil prices, weaker US dollar and easing credit crunch.
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