S&P Global Ratings outlines potential credit risk for GCC posed by the energy transition, covered by specialist press

A lack of economic diversification, coupled with a sometimes-lower availability of external funding sources, means that a decreased oil and gas prices and shifting investor appetite could contribute to deteriorated creditworthiness for some GCC banks. That’s according to S&P Global Ratings, in its recent report mini-series exploring the credit risks that the transition towards cleaner energy sources could have on the GCC’s banks and overall economy.

While GCC economies have somewhat diversified away from oil since 2012, S&P Global Ratings’ hypothetical long-run stress test suggests that the average rating of a Gulf sovereign could fall by two notches from ‘BBB+’ to ‘BBB-’ if oil prices fall below US$40 by 2040, highlighting that the current pace of economic and fiscal diversification is insufficient to counter the decline in oil prices.

Following outreach by Moorgate-Finn, the research was covered by Trade Arabia, ZAWYA, AMEInfo, and The Peninsula Qatar.