Implications of the new coronavirus outbreak could weigh on growth prospects in the GCC, given the importance of the Chinese economy to global economic activity, said S&P Global Ratings in a new report.
“We expect the rating impact will be limited for GCC issuers, however, assuming the virus will be contained by March 2020, allowing travel and other restrictions to be unwound in the second quarter, and there's no major impact on oil prices,” S&P Global Ratings said in the report titled "Coronavirus Increases Risks For Gulf Economies”.
China contributes between 4 per cent and 45 per cent of GCC countries' total good exports, with Oman being the most exposed. Virus-related travel restrictions, if not lifted as we expect, could weigh on the GCC's hospitality industry, but more so in Dubai, which received almost 1 million visitors from China in 2019.
If the virus continues to spread, there is a risk that the economic impact could increase unpredictably, with credit implications not just for China but elsewhere. For the GCC, this could result in a drop in oil prices, economic growth, and real estate prices, alongside a change in government spending, which could put pressure on regional issuers we rate.
“Under our base-case scenario, however, we expect the impact on our ratings to be limited for now,” the report said.
The rate of spread and timing of the peak of the new coronavirus is still uncertain. However, modelling by epidemiologists indicates a likely range for the peak of between late-February and June.
“For purposes of assessing the economic and credit implications of the outbreak, we assume the outbreak will be contained in March,” it added. – TradeArabia News Service