Muscat: Corporate earnings in the Gulf Cooperation Council (GCC) increased by 16 per cent for the full year in 2017 compared to 2016, according to the latest report by the Kuwait Financial Centre (Markaz).
In 2017, UAE, Kuwait and Saudi Arabia registered growth in earnings of 62 per cent, 10 per cent and 9 per cent, respectively.
UAE recorded such a high rate on account of a low base. Saudi Arabia’s growth was largely helped by the momentum in its non-oil sectors, such as banking, telecommunications and utilities. Kuwait was aided by the performance in the commodities and real estate sectors.
On an aggregate basis, commodities, banking and construction were top sectoral performers, with earnings growing at 29 per cent, nine per cent and six per cent, respectively. The recovery of oil prices and improved interest margins helped the commodities and banking sector companies post higher profitability. The improved profitability reported by the construction sector companies can be attributed to a lower base, as several companies reported losses during 2016.
Saudi Arabia saw a nine per cent rise in overall earnings in 2017, largely prompted by the earnings growth in commodities and telecommunications of 28 per cent and 23 per cent respectively. The banking sector witnessed a nine per cent gain in earnings and all the banks in the country witnessed earnings growth during 2017 compared to 2016. The construction and real estate sectors slumped on the back of a weak economic environment with negative sentiment impacting activity levels and sale prices. The construction industry was plagued by a delayed cash cycle and, as a result, earnings fell by 59 per cent.
Kuwait’s 10 per cent increase in earnings was supported by growth in the financial services, real estate and commodities sectors. Kuwait’s banking sector witnessed a one per cent decline in earnings during 2017 owing to a marginal recovery in the credit growth. Telecommunications and construction witnessed a decline of two per cent and six per cent respectively in 2017. The telecommunications sector’s earnings declined from $788 million in 2016 to $769 million, while the construction sector’s reduced earnings stood at $211 million in 2017.
United Arab Emirates
UAE’s overall earnings gained by 62 per cent in 2017 because of the low base effect. In the 2016 fourth quarter, Abu Dhabi National Energy (Taqa) registered a loss of $4 billion on account of impairment of assets, which dragged the overall earnings for UAE down to $11.4 billion. UAE banks increased earnings by 21 per cent during 2017, while the other two major sectors of the economy, telecom and real estate, posted declines of two per cent and 28 per cent in earnings during the same period.
All of Qatar’s sectors with the exception of banking, utilities and commodities witnessed a decline in their earnings during 2017. Banking, utilities and commodities witnessed a gain of five per cent, four per cent and two per cent, respectively during 2017. The ongoing diplomatic crisis appears to have impacted the earnings across sectors. However, support from the government and recovery of oil prices shielded the banking and commodities sectors’ profitability to some extent.
“We expect GCC corporate earnings to expand by four per cent in 2018 over 2017 and reach $69.4 billion by the end of the year. The GCC governments are set to embark on an expansion mode following a year of fiscal consolidation and several austerity measures,” the Markaz report said.
“Economic heavyweights of the region, UAE and Saudi Arabia, are expected to see their corporate earnings increase by four per cent and seven per cent, while earnings in Kuwait are expected to remain flat at one per cent. The earnings for Qatar and Oman are expected to expand by three per cent, while Bahrain is likely to contract by one per cent during 2018,” the report further added.