GCC economies resilient to MENA turmoil but constrains persist S&P.

By bne IntelliNews February 12, 2013
The GCC economies remain insulated from economic and political turbulence in the MENA region and globally but structural challenges continue to constrain sovereign ratings, ratings agency S&P said. GCC states, however, will achieve an aggregate 4.3% GDP growth in 2013, the agency forecast. S&P said it rates seven GCC sovereigns including Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, Ras Al Khaimah, and Saudi Arabia. All have a stable ratings outlook. But S&P warned of existing shortcomings in the effectiveness and predictability of policymaking in the GCC." The list includes quality of policy debate, the strength and depth of institutions, transparency of decision-making, data monitoring and reliability of information, legal frameworks and the rule of law, and succession risks, S&P said. The lack of monetary policy flexibility is also said to be a ratings constraint for the GCC. Exchange rate regimes, credibility of monetary policy and effectiveness of the transmission mechanism via the financial system and capital markets, are the main weaknesses, the agency noted. Oil reserves could diminish in some GCC countries much earlier than in others, S&P said. Reserves at current production levels will last about 90 years in Abu Dhabi and Kuwait, and 70 years in Saudi Arabia, but are considerably lower in Oman and Bahrain where, at current production levels, supplies could run out in the next two decades," S&P said.

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