S&P Global: Gulf firms unlikely to remain unhurt by trade tensions for long

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S&P Global Ratings stated that GCC companies are not expected to remain unaffected by trade tensions for long, indicating that the timing and impact of this crisis will vary by sector.

Despite the economic diversification efforts undertaken by GCC countries, economic growth remains closely linked to oil prices. GCC companies are likely to be negatively impacted by lower oil prices and the slowdown in the global economy, rather than by the tariffs themselves, the ratings agency said, in a report.

It added that the major investment plans adopted by GCC countries, which focus on diversifying their economies away from oil, are supporting the momentum of GDP growth, although some of these plans may be delayed due to lower oil prices.

The outlook for rated Gulf companies remains stable, said S&P Global, indicating that 61% of companies are rated investment grade.

The sectors that could be severely impacted if geopolitical pressures escalate and regional and non-regional allies become involved in the conflict are hospitality, tourism, airlines, real estate, and consumer goods, according to the report.

Currently, rated chemical producers are no expected to experience a direct tangible financial impact, as their diversified asset bases will help them redirect volumes to other regions. Some rated chemical producers may benefit in the short term, as Middle Eastern products may replace a portion of US petrochemical exports (such as polyethylene), S&P Global said.

The slowdown in global GDP growth in the medium to long term could translate into a decline in global demand for chemicals and industrial goods in the end market, it added.

S&P Global also noted that the rated companies with significant near-term debt maturities include Emirates Telecommunications Group, Saudi Electricity Co., Saudi Basic Industries Corp (SABIC), and Equate Petrochemical Co. “However, these maturities do not pose any risks, as these companies have a strong track record of refinancing and good banking relationships,” it noted.