Emirates Investment Bank's 2019 GCC Wealth Insight Report shows that high net worth individuals (HNWIs) in Gulf Cooperation Council (GCC) countries are more optimistic about economic conditions in the GCC than they were over the past three years. HNWIs are defined as individuals with $2m or more in investable assets. In fact, the survey noted that 71% of HNWIs consider that economic conditions in the GCC region have improved significantly, compared to 31% of participants in the 2018 survey, 20% of surveyed HNWIs in the 2017 report, and 17% of respondents in the 2016 survey. It also pointed out that 96% of surveyed HNWIs are optimistic about economic prospects in the GCC in the next five years, compared to 69% of respondents who had similar views in the previous survey. It added that the confidence of HNWIs in the GCC region's strong growth prospects for 2019 has prompted them to invest locally, especially in their own businesses. In fact, it said that 75% of respondents indicated that they are focused on local investment opportunities rather than on investing globally. It added that 40% of surveyed HNWIs prefer investing in their own business, relative to 31% of participants in the 2018 survey. In addition, the survey shows that currency fluctuations have a significant impact on the investment decisions of 79% of HNWIs, followed by global oil price movements (76% of surveyed participants) and the introduction of the value-added tax in GCC countries (73% of respondents).
Source: Emirates Investment Bank

Jadwa Investment projected Saudi Arabia's real GDP growth to slightly decelerate from 2.2% in 2018 to 2% of GDP in 2019, mainly due to lower hydrocarbon output. It forecast growth in the hydrocarbon sector to slow down from 2.8% in 2018 to 1.6% this year, as output is expected be constrained by production cuts under the OPEC agreement. However, it anticipated non-hydrocarbon sector growth to slightly accelerate from 2.1% in 2018 to 2.3% in 2019 amid an expansionary fiscal policy as well as stronger activity in the non-oil manufacturing, construction and transportation sectors. It considered that global economic and regional political developments, lower global oil prices, as well as tight global financing conditions constitute the main external risks, while the increase in expatriate levies in 2019 is the most significant domestic risk.  

In parallel, Jadwa forecast the Kingdom's fiscal deficit to widen from 4.6% of GDP in 2018 to 5.5% of GDP in 2019 and to miss the government's target of 4.2% of GDP, due to lower-than-budgeted oil revenues and record-high public spending. However, it noted that its revenue projections for this year exclude potential receipts from privatization or proceeds from corruption probes. It anticipated fiscal financing requirements to reach about SAR118bn in 2019, and expected authorities to issue external bonds this year, and to drawdown government deposits held at the Saudi Arabian Monetary Agency (SAMA) to finance the deficit. In turn, it projected the gross public debt level to rise from 19% of GDP at end-2018 to 22% of GDP at the end of 2019. Further, it projected the current account surplus to decrease from 9.1% of GDP in 2018 to 7.9% of GDP in 2019, due to lower export receipts, but to recover to 8.3% of GDP in 2020 in case of higher oil and non-oil export revenues. In this context, it did not anticipate a significant buildup in foreign currency reserves at SAMA, amid sizable net outflows from the non-reserve financial account. It forecast official reserve assets at $508bn, or about 62.2% of GDP at end-2019 and at $516bn, or about 59.4% of GDP at end-2020.   
Source: Jadwa Investment

Fitch Ratings indicated that it downgraded the Issuer Default Ratings (IDRs) of 42 banks worldwide in the second half of 2018, including 36 banks in emerging economies and six banks in developed countries. It indicated that banks in the Middle East & Africa region accounted for 64.3% of total downgrades, followed by banks in Emerging and Developed Europe (9.5% each), Emerging Asia (7.1%), Emerging Americas (4.8%), and Developed Americas and Developed Asia Pacific (2.4% each). It noted that the number of downgrades doubled from the first half of 2018, mainly due to the downgrade of 25 Turkish banks. It added that the downgrades in developed markets were mainly due to pressures on capitalization, while the banks' downgrades in emerging markets, notably in the Middle East & Africa region, reflected a challenging operating environment and the reduced ability of authorities or of foreign parent banks to provide support in case of need. In parallel, the agency upgraded the ratings of 28 banks globally in the second half of 2018, including 14 banks in emerging markets and 14 in developed economies. It said that banks in Developed Europe accounted for 46.4% of upgrades globally, followed by banks in Emerging Europe (21.4%), the Middle East & Africa region (14.3%),  Emerging Asia (10.7%), and Developed and Emerging Americas (3.6% each). It noted that 50% of the banks' upgrades is due to the improvement in their standalone profiles. Further, it said that the banks' upgrades in emerging markets reflect similar actions on the sovereign ratings, a positive reassessment of the country risk, and/or a stabilization in the banks' asset quality, among others. 
Source: Fitch Ratings