Gulf economies to take coronavirus exports hit says S&P

The ratings agency believes there is a risk that the economic impact of the virus could increase unpredictably with implications for overall economic growth, the oil price and the creditworthiness of some companies. (File/AFP)
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Updated 17 February 2020

Gulf economies to take coronavirus exports hit says S&P

  • S&P expects oil prices to remain at $60 per barrel in 2020 and decline to $55 from 2021
  • The ratings agency expects the impact on the banking sector to be low, with little direct exposure to Chinese companies

LONDON: Gulf states already hurt by a weak oil price could reap further economic pain from the impact of the coronavirus on their exports, S&P Global Ratings warned on Monday.

The ratings agency believes there is a risk that the economic impact of the virus could increase unpredictably with implications for overall economic growth, the oil price and the creditworthiness of some companies. Still, its base case scenario anticipates a limited impact for now.

“Given the importance of the Chinese economy to global economic activity, S&P Global Ratings expects recent developments could weigh on growth prospects in the GCC, already affected by low oil prices and geopolitical uncertainty,” it said in a report.

Although the rate of spread and timing of the peak of the new coronavirus is still uncertain, S&P said that modeling by epidemiologists indicated a likely range for the peak of between late-February and June.

Notwithstanding the spread of the virus, S&P expects oil prices to remain at $60 per barrel in 2020 and decline to $55 from 2021.

It sees the biggest potential impact on regional economies to be felt in terms of export volumes. S&P estimates that GCC countries send between 4 percent and 45 percent of their exported goods to China, with Oman being the most exposed (45.1 percent) and the UAE the least exposed (4.2 percent).

Beyond the trade of goods, the Gulf’s hospitality sector could also feel the effect of reduced tourist arrivals with hotels and shopping malls likely to suffer. The impact could be further amplified because of the high-spending nature of Chinese tourists.

On-location spending by Chinese tourists is the fourth largest in the world at $3,064 per person, according to Nielsen data. About 1.4 million Chinese tourists visited the GCC in 2018 with expectations of that figure rising to 2.2 million in 2023, and with the UAE as the main destination.

Chinese passengers also accounted for 3.9 percent of passengers passing through Dubai International Airport in 2018.

S&P said that if the effect of the new coronavirus is felt beyond March, the number of visitors to Expo 2020 in Dubai could be lower than expected.

The ratings agency expects the impact on the banking sector to be low, with little direct exposure to Chinese companies.

 


NMC Health’s new executive chair vows to recover misused funds

Updated 05 April 2020

NMC Health’s new executive chair vows to recover misused funds

  • London-listed NMC recently revised its debt position to $6.6 billion, much higher than earlier estimated
  • NMC’s stock has more than halved in value since December and trading in its shares was suspended in February

DUBAI: The new executive chairman of hospital operator NMC Health vowed on Saturday to work with authorities in Britain and the United Arab Emirates (UAE) to recover misused funds and called on the company’s creditors for a debt standstill.
Faisal Belhoul said in a statement that keeping NMC Health operating was a “national priority,” particularly as the country and the world battle the coronavirus pandemic.
Belhoul said putting the hospital operator into administration would “cause instability to the operating businesses of the NMC Group, creating additional pressure on the group’s liquidity and reducing value for all creditors.”
A temporary debt standstill, by contrast, would allow the firm to prepare and activate a recovery plan.
London-listed NMC recently revised its debt position to $6.6 billion, much higher than earlier estimated.
NMC’s stock has more than halved in value since December and trading in its shares was suspended in February. The decline was triggered by a report by short seller Muddy Waters that questioned the company’s financial statement.
Belhoul’s appointment was made after the company’s non-executive directors uncovered alleged theft and excess undisclosed borrowings by former directors of the company, the statement said.
Belhoul is a founder and chairman of Ithmar Capital Partners, which owns a 9% stake in NMC.
“We are working in full cooperation and in close dialogue with authorities in the UAE and UK, including the UK’s Financial Conduct Authority (FCA), and will vigorously chase down the perpetrators for return of these funds,” he said.
Abu Dhabi Commercial Bank, one of more than 80 local, regional and international creditors, said last week it had over $981 million exposure to NMC Health.
NMC Health claims to be the largest private health care company in the UAE, operating more than 200 facilities, which includes hospitals, clinics and pharmacies.
“The NMC Group is currently treating hundreds of people suspected of having COVID-19 and in the UAE has screened more than 10,000 workers for the virus in partnership with the Ministry of Health and Prevention and the Ministry of Human Resources and Emiratization,” the statement said.