The imminent rate cuts by global central banks in 2024 are poised to have a predominantly positive impact on the economies of the Gulf Cooperation Council (GCC), according to a comprehensive report.

Kamco Invest’s GCC Fixed Income Market Update for December 2023, authored by Junaid Ansari, Head of Investment Strategy & Research at Kamco Invest, posits that the global economic slowdown is anticipated to be milder than initially expected, manifesting as a soft landing in economic growth.

This, coupled with lower inflation rates in the GCC, is anticipated to bode well for the region’s GDP growth, supported by a flourishing non-oil GDP, a robust project pipeline, and elevated oil prices.

The report underscores the robust credit profiles of most GCC countries, bolstered by recent upgrades, contributing to stability in both currency and the fixed income funding market.

In the primary market, the latter half of the year witnessed GCC bonds and sukuk issuances surpassing market expectations, with several substantial issuances. Saudi Arabia’s sukuk issuances, combined with bond issuances in the UAE, propelled aggregate issuances in the GCC to over $100 billion, reaching $107.8 billion by mid-December 2023—a notable increase from the $90.0 billion recorded for the entire year in 2022.

The report predicts that GCC governments will experience heightened levels of bond maturities over the next five years.

According to Bloomberg data, GCC sovereign maturities are projected to be $209.3 billion from 2024 to 2028, while corporate maturities are significantly lower at $177.9 billion.

The report anticipates sustained elevated maturities from 2024 to 2028, gradually tapering thereafter. The increase in maturities over the next five years reflects short-term issuances during 2020 and 2021, aimed at raising funds to address deficits during the pandemic.

The majority of these maturities are denominated in US dollars (59.7%), followed by local currencies such as Saudi riyals (16.3%) and Qatari riyals (7.6%).

The credit rating profile of GCC governments predominantly places these maturities in high investment-grade or A-rated instruments.

Breaking down the types of instruments, conventional bonds dominate with $244.3 billion in maturities over the next five years, while sukuk maturities are expected to be at $142.9 billion.

Saudi Arabia is anticipated to have the highest maturities from 2024 to 2028 at $131.9 billion, followed by the UAE and Qatar at $122.5 billion and $71.4 billion, respectively.

Kuwait records the smallest maturities at $14.1 billion due to a lack of government issuances.

Sector-wise, the financial services sector, including banks, accounts for $130.9 billion in maturities over the next five years, constituting 73.6% of total corporate maturities and 33.8% of total maturities in the GCC until 2028.

The energy sector follows with maturities of $17.9 billion, or 10.0% of GCC corporate maturities until 2028, trailed by utilities and communications at $11.4 billion and $6.1 billion, respectively.

UAE banks lead in maturities over the next five years at $60.2 billion, with Qatari banks following closely at $26.3 billion, collectively accounting for 22.3% of total bond/sukuk maturities in the GCC.

Real estate maturities are concentrated in the UAE and Saudi Arabia at $6.3 billion and $2.9 billion, respectively, until 2028.

The structure of maturities reveals a decline in perpetual instrument issuances, dropping from $11.5 billion in 2022 to $2.0 billion in 2023, according to Bloomberg data.

Last Updated : 01 January 2024