(MENAFN- Muscat Daily) Muscat- Large GCC companies, many of which are government-owned, will increasingly tap capital markets for funding over the next five years, pushed by structural reforms that regional governments are implementing to cope with the new reality of low oil prices, Moody's Investors Service said in a report released on Wednesday.
'The GCC non-financial corporates in mature and capital intensive sectors, such as oil and gas, refining and petrochemicals, utilities, real estate and infrastructure, are likely to access debt markets more and more to fund capital investments, while others are exploring options to diversify funding sources to reduce reliance on domestic banks', Rehan Akbar, vice president and senior analyst at Moody's, said in the report titled 'Non-financial corporates - GCC: Corporates are adapting as regional challenges persist'.
Moody's said the GCC governments, including Oman, have done fairly well in balancing reform implementation while preventing a systemic shock in the corporate sector.
It said that the fiscal reforms in the GCC, which include the introduction of value-added tax and removal of fuel and utility subsidies, are causing inflation and putting pressure to a varying degree on corporate profits and consumer sentiment. 'However, the reduction in subsidies has curbed growing demand for fuel, water and electricity and alleviated pressure on state-owned companies to constantly invest to meet demand', it said.
Moody's noted that elevated regional geopolitical risk has increased the complexity in the business landscape and is likely to dampen investor sentiment. 'For example, the trade boycott against Qatar has affected companies to a varying degree on both sides of this ongoing dispute. In Qatar, real estate, contracting and hospitality firms in particular are facing pressure while commodity exporters remain resilient.'
With fewer organic growth opportunities available in the GCC corporate sector, Moody's expects rising industry consolidations, international acquisitions, investments in increasing vertical integration and an increased emphasis on driving down costs, with examples seen in the telecom, petrochemical and real estate sectors.
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