GCC debt markets to remain active in 2018

Muscat: The debt markets activity in the Gulf Cooperation Council (GCC) has surged in 2017, with sovereign debtors accounting for the lion’s share, followed by corporates. This activity has been propelled by strong interest from regional and international investors, and cemented by a stable credit outlook, a new report by PwC Middle East shows.
Looking ahead, 2018 is set to be a busy year, as market participants try to stay ahead of monetary policy reforms, such as interest rate hikes by the US Federal Reserves and the European Central Bank’s gradual tapering of its quantitative easing programme, the report states.
The PwC report anticipates that debt markets will remain active in 2018, although the recent rally in oil prices has eased short-term liquidity pressure. Despite this, GCC governments continue to rely on sovereign issuances to curb their budget deficit and fund their growth plans.
The concern remains, however, as to whether the potential oversupply in the debt market could result in an increase in the cost of borrowing in the GCC region and put a downward pressure on credit quality.
Global debt markets
The year 2017 witnessed robust activity for global debt markets, despite geopolitical uncertainty and fiscal policy headwinds. Borrowers were relatively active across global debt markets, benefiting from favourable economic fundamentals, such as low interest rates, high liquidity, tolerable levels of volatility and monetary inflation.
At the moment, the markets remain resilient against geopolitical uncertainties and monetary policy changes. However, there seems to be a surge in both volatility and inflation levels, which in the long run could translate into an increase in debtors borrowing costs and credit default risk.