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S&P Global — 16 January 2025
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
The Gulf Cooperation Council (GCC) was formed in 1981 to promote political and economic alignment between the Persian Gulf countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The members of the GCC have broad economic alignment due to the dominance of the fossil fuel industry in each country’s economy and their currencies being effectively pegged to the US dollar. This reduces each country’s scope for monetary independence but aligns these export-driven economies with the default currency of international trade. As a result of these close economic ties, the banking industry across GCC countries is broadly aligned, with some country-level variability resulting from economic diversification efforts.
The net interest income of banks is partly determined by factors that the banks can control — such as the structure of their fixed-income investment books and overall liquidity position, their lending mix and risk appetite, and their mix of funding instruments. However, banks cannot control factors such as policy rates, government bond yields, competition between banks and nonbank financial institutions, or customer price sensitivity/inertia.
According to S&P Global Ratings, banks in the GCC can anticipate higher lending growth and a lower cost of risk that will compensate for declining margins. GCC bank margins will decline mainly due to declines in net interest margins as central banks across the region cut their rates to maintain their peg to the US dollar. Lending growth will improve in most of the GCC due to strong deposit growth. The cost of risk will decrease for GCC banks due to past precautionary provisioning. S&P Global Ratings projects that geopolitical risk will remain in check and that even if geopolitical issues persist or increase, banks in the region are well positioned to weather the storm.
Performance at GCC banks will vary by country. In Kuwait and Qatar, there is apparent overexposure to the real estate sector for banks. In Kuwait, easing visa restrictions may increase demand and prices for real estate. In Qatar, much of the real estate oversupply was due to construction associated with hosting the World Cup. S&P Global Ratings anticipates that lower interest rates will help stimulate demand for Qatari real estate and that interest rate cuts in Bahrain will improve the quality of banks’ real estate assets.
For Saudi Arabia, deposit growth appears to be slowing, increasing reliance on external funding. Vision 2030 projects in Saudi Arabia have substantial funding requirements. Banks in the United Arab Emirates have benefited from a strong domestic economy, leading to improved asset quality metrics and lower credit losses. Qatar has also benefited from strong growth in its hydrocarbon economy, which has helped to support credit growth in that country. S&P Global Ratings forecasts that these trends should continue through 2025.
Today is Thursday, January 16, 2025, and here is today’s essential intelligence.
Led by investment in solar capacity, global spending on clean-energy technologies will exceed investment in upstream oil and gas for the first time in 2025. S&P Global cleantech experts Edurne Zoco and Sam Wilkinson join EnergyCents hosts Hill Vaden and Sam Humphreys to discuss the top 10 trends that will shape clean energy technology supply chains in 2025.;
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Real GDP growth in the Asia-Pacific region is likely to moderate in 2025 while still outperforming global expansion. Growth constraints include the probable economic slowdown in mainland China, curtailment of global trade, renewed pressure on local currencies and slower monetary policy easing.
—Read the article from S&P Global Market Intelligence
S&P Global Ratings forecasts that sukuk issuance will amount to $190 billion to $200 billion in 2025, following the market's strong performance last year. Total issuance reached $193.4 billion in 2024, down slightly from the previous year's $197.8 billion. However, a notable difference was the 29% rise in foreign-currency issuance to $72.7 billion as of Dec. 31, 2024. The main contributors to this increase were issuers from Malaysia, GCC countries — led by Saudi Arabia — and Indonesia.
—Read the article from S&P Global Ratings
As the 2025 deadline for sustainability goals approaches, the lack of supply of post-consumer resin (PCR), coupled with the cost attractiveness of virgin materials, has hindered progress toward key recycling objectives, according to market participants and recent reports from major plastics recycling pacts in the US and Canada. The US Plastics Pact (USPP) 2023-24 Impact Report indicated that although the use of recycled content saw a slight increase to 11% across packaging portfolios in 2023, up from 9.4% in 2022, it still falls short of the 30% target established for 2025.
—Read the article from S&P Global Commodity Insights
The oil market will be heavily oversupplied by 2026, as members of OPEC+, a coalition of OPEC and other oil producers, taper their production cuts, Saudi think tank KAPSARC said Jan. 13, challenging the producer alliance as it seeks to regain market share without depressing crude prices. In its latest quarterly market forecast, Riyadh-based KAPSARC said it expects a 260,000 b/d surplus in 2025, rising to 1.01 million b/d in 2026.
—Read the article from S&P Global Commodity Insights
Despite improving capital market conditions, 2024 was a difficult year for the US telecom and cable industry due to high borrowing costs and increasing competition for broadband services that hurt credit quality for many companies. As a result, ratings downgrades exceeded upgrades by almost 2 to 1 and 25% of the companies rated by S&P Global Ratings in the sector are at 'CCC+' or lower compared with 20% a year ago.
—Read the article from S&P Global Ratings
As we kick off 2025, much of the optimism and concern of 2024 continues, with markets seeking clarity on the energy transition, climate risk and sustainability opportunities. Join our first Beyond ESG webinar of the new year to unpack key trends.
—Register for the webinar from S&P Global Sustainable1