Standard & Poor’s forecasts robust growth for Gulf banks in 2024

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KUWAIT CITY, Feb 3, (Agencies): Standard & Poor’s credit ratings agency anticipates continued strong credit growth and profitability for Gulf banks in 2024, with a slight dip from 2023 levels. The agency suggests that the region’s banks are poised to maintain robust creditworthiness, thanks to their strong capitalization levels, projecting an overall strengthening of capital ratios across Gulf banks, except in Saudi Arabia, where the fastest growth is expected in 2024.

In a recent report, the agency emphasizes the need for Gulf banks to sustain key banking metrics in 2024, focusing on good capitalization, strong profits, prudent provisions, and overall robust liquidity.

The report highlights potential risks that could impact Gulf banks, including a deteriorating geopolitical environment, exposure to high-risk markets like Turkey and Egypt, volatility in oil prices, and significant exposure to the real estate sector.

Standard & Poor’s envisions an acceleration of real GDP growth in all Gulf countries in 2024, except for Bahrain. The non-oil economy is expected to remain particularly active in Saudi Arabia and the UAE, supporting the anticipation of high interest rates in the region until a 1% decline by the year-end, aligning with the US Federal Reserve. The report also expects inflation to remain close to target levels until the end of 2024.

While acknowledging the potential for geopolitical tensions to impact expectations, the agency predicts stable crude prices in 2024, supporting continued government financial spending. However, it highlights that ongoing geopolitical tensions pose a threat to these expectations. Additionally, weaker-than-expected growth in the Chinese economy could pose risks to oil demand and potentially lead to financial pressures on Gulf countries with relatively high break-even prices.

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