Although they have made strides towards diversifying their economies away from oil, Gulf countries remain dependent on hydrocarbon revenues, making them susceptible to market fluctuations, S&P Global Ratings said.
"Gulf economies' high concentration and dependence on the hydrocarbon sector, which averaged about 30 per cent of GDP and 60 percent of total exports over 2015-16 – even considering subdued oil prices – could become a credit- negative factor when not offset by substantial financial buffers," the agency said. "Despite supporting the economy when hydrocarbon prices are high, we believe a narrowly-based economy tends to be more vulnerable to key sector business cycle swings, amplifying the volatility of its growth, general government revenues, and current account receipts."
Fixed exchange rates, a harsh climate and a lack of local skilled labour will make it difficult for Gulf nations to diversify their economies away from oil, the agency said in a report, adding its recent lowering of long-term currency ratings on Oman, Bahrain and Saudi Arabia was in part because of concerns about economic diversification and the impact low oil prices have had on regional economies.
"These rating actions also reflected our view that GCC sovereigns have made only marginal progress in diversifying their economies away from hydrocarbons, given the still sizeable contribution of the sector to their economies," said analysts led by Trevor Cullinan at S&P Global Ratings in Dubai.
"While non-oil real GDP has picked up in the region since 2000, the growth rate has gradually decelerated over the last three years in tandem with the decline in oil GDP, further highlighting that diversification efforts are yet to pay off, in our view."
GCC nations have made steps to lessen their reliance on oil in recent years by reducing energy subsidies and mapping out ambitious plans to boost revenues including a value added tax. Still, these plans may take a long time to materialise and there are a number of structural impediments in their way, S&P noted.
Of the serious structural impediments pointed out that the climate of countries in the region, S&P Global Ratings said climate, which averages between 15 degrees Centigrade, was among the biggest constraints preventing the diversification of the economy, especially when it comes to agriculture and manufacturing.
"Development of agriculture, along with other primary sectors, is often the precursor of a shift to manufacturing (secondary sector) and services (tertiary sector)," the report said.
"Given the geographical disadvantages faced by GCC economies, they have not developed in line with this theory."
And when it comes to currencies, the rating agency noted that a pegged currency hampers the ability of GCC countries to be competitive when it comes to non-oil exports.
The UAE was not, however, among the countries to experience a lowering of its long-term currency ratings by S&P last month and has generally been singled out as the one country that has done better than most in the GCC to diversify its economy, especially in the past couple of years and because it has high reserves of cash.
As a result the rating agency earlier this week affirmed the credit ratings of Abu Dhabi, maintaining the Emirate's AA/A-1+ sovereign credit rating while keeping its outlook stable. The agency said that Abu Dhabi would maintain its strong net fiscal asset position above 200 per cent of GDP over 2017 to 2020, one of the highest among government economies that the rating agency reviews.
MATCH INFO
Everton 2 (Tosun 9', Doucoure 93')
Rotherham United 1 (Olosunde 56')
Man of the Match Olosunde (Rotherham)
New schools in Dubai
ASHES FIXTURES
1st Test: Brisbane, Nov 23-27
2nd Test: Adelaide, Dec 2-6
3rd Test: Perth, Dec 14-18
4th Test: Melbourne, Dec 26-30
5th Test: Sydney, Jan 4-8
Elvis
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ABU%20DHABI%20CARD
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TO A LAND UNKNOWN
Director: Mahdi Fleifel
Starring: Mahmoud Bakri, Aram Sabbah, Mohammad Alsurafa
Rating: 4.5/5
FROM%20THE%20ASHES
%3Cp%3EDirector%3A%20Khalid%20Fahad%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Shaima%20Al%20Tayeb%2C%20Wafa%20Muhamad%2C%20Hamss%20Bandar%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
MATCH INFO
Europa League final
Who: Marseille v Atletico Madrid
Where: Parc OL, Lyon, France
When: Wednesday, 10.45pm kick off (UAE)
TV: BeIN Sports
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
