Mubasher: Moody's Investors Service said that the UK’s vote to leave the European Union (EU) will not have a significant credit impact on GCC sovereigns as their trade exposure to the UK is limited and their sovereign wealth funds size offers resilience against potential fluctuations in the value of some assets, according to a recent report.
GCC sovereign wealth fund portfolios are generally large and well diversified, allowing it to absorb the impact of asset price and exchange rate movements linked to Brexit, the report added.
“Moody's notes that trade between the GCC and the UK is modest. GCC export shares to both the UK and EU have declined over time, as energy demand from Asia has increased. In 2015, GCC trade with the UK accounted for 2.7% of the region's global trade,” according to the report.
The British investment in the GCC is unlikely to slow; most of the UK's FDI in the GCC is in the hydrocarbon sector which is unlikely to be materially affected by Brexit.
Meanwhile, Moody’s said that the banking sector retrenchment shows moderate risks, with the UAE and Qatar vulnerable in the event of a retrenchment of UK banks from the region.
“Nonetheless, the risk of a sudden scale-back in operations is limited and stocks have proved relatively stable through past shocks.”
