Markaz: Oil rally lifts the regional markets


Kuwait Financial Centre “Markaz” recently released its Monthly Market Research report. In this report, Markaz provides a commentary on economic and market events that transpired in the GCC region for the month of January 2018.

The report stated that for the GCC markets, the year started on a good note with oil prices rebounding by 3.3% to close above USD 69/bbl. S&P GCC Composite Index gained by 1.5% during January 2018, in-line with most of the GCC markets, which closed on a positive note. Qatar was the best performing market in January 2018 (8%) followed by Saudi Arabia at 5.9%.

The report added that Kuwait announced its budget for the fiscal year 2018-2019, projecting an estimated deficit of USD 16.7bn or 13.5% of the GDP, before the transfer of 10% of revenues to Kuwait's sovereign wealth fund. However, Kuwait is going steady on its path to fiscal reform and hence the total expenditure has been capped at only 0.5% higher from last year’s expenditure.

Saudis and expatriates welcomed New Year to a number of structural economic reforms, which included a hike in local gasoline and electricity tariff. This is the second hike since the beginning of oil price fall. Starting from 2018, the consumers will have to bear a threefold increase in electricity tariff with the implementation of Value Added Tax (VAT) and a revised bill calculation system.

UAE and Saudi Arabia also welcomed the new year by introducing the first-ever VAT, a tax on goods and services that consumers must pay at the time of purchase - however other Gulf nations, including Bahrain, Kuwait and Oman delayed introducing the tax until 2019. The five per cent sales tax applies to most goods and services.

Oman too like most of its other regional peers has opted to boost its capital spending in its budget for 2018. However, this comes at the cost of running significant fiscal deficit of approximately USD 7.8bn or 10% of GDP. Revenues for the year 2018 are projected at USD 24.7bn which is a c. 9% increase from USD 22.6bn in the 2017 budget.

The Saudi’s foreign reserves increased by USD 1bn to USD 486.9bn in November 2017, post an USD 8.3bn jump in October 2017. A further increase in foreign reserves is expected in December’ 2017 as well, making it third straight month rise.

Saudi is expected to embark on a debt-raising spree in 2018, accounting for majority of the aggregate issuances in GCC that could top USD 50 billion. Saudi Arabia's government sold 5.85 billion riyals ($1.56 billion) of domestic sukuk in its fifth monthly offer of domestic sukuk.

The Omani government sold its largest ever bond issuances worth USD 6.5bn during Jan-18. The issuance follows Fitch Ratings downgrade of Oman's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BBB-' from 'BBB' in Dec-2017.

About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre K.P.S.C “Markaz”, established in 1974, is one of the leading asset management and investment banking institutions in the MENA Region with total assets under management (AUM) of KD 1.02 billion as of September 30, 2017. Markaz shares are listed on Boursa Kuwait since 1997.

For further information, please contact:

Alrazi Y. Albudaiwi
Media & Communications Department
Kuwait Financial Centre K.P.S.C. "Markaz"
Tel: +965 2224 8000 ext 1800
Fax: +965 2246 7264
Email: [email protected]