CGI Gulf Insights of the Week Oct 18 2020

  • ByCGI Gulf Insights of the Week
  • Sunday, 18 October 2020
  • Published inOctober 2020
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Country Risk Update - Oman

Risk Indicator  - DB4d
Risk Level        - Moderate

Ratings Trend  - Stable
Mounting fiscal pressures have forced Oman to seek financial support from Gulf countries, threatening to undercut its traditional foreign policy independence. Sultan Haitham's (so far) smooth succession reduces the risk of domestic instability and increases the likelihood of needed fiscal reforms. The economy has good potential for diversification, including tourism and logistics.
Market Overview
Gulf currency pegs offer silver lining in era of weaker dollar
More than a decade ago, Gulf Arab nations struggled to preserve their currency pegs as the dollar went into retreat. This time, the link to a sliding greenback may give reassurance. Back in 2007 and 2008, the weak dollar sent the cost of imports spiraling and allowed inflation to take hold. Now, the sluggish domestic demand has put a lid on price growth, while the dollar declines could give a boost to non-oil industries like tourism once the pandemic eases. Also out of the picture are the inflationary hot-money flows to the region when Brent crude was near $150 12 years ago. “The decline in the dollar will be positive for the Gulf Cooperation Council once the impact from the Covid-19 pandemic softens,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank in the United Arab Emirates. “The dollar pegs still remain an important anchor to the economy and for capital inflows.”
GCC banks to remain resilient despite economic challenges
GCC’s banking system has been resilient despite the economic impact of COVID-19 and low oil prices for a prolonged period, according to analysts and rating agencies. “Well capitalized and with low non-performing loans (NPLs) through June 2020 GCC banks remain strong. However, vulnerabilities may lead to rising NPLs towards the end of this year and in 2021, particularly if a recurrence of the pandemic forces the re-imposition of containment measures or if oil prices drop well below $40/b for more than a few months,” said Garbis Iradian, Chief Economist, Mena of the Institute of International Finance. The profitability of the region’s banks has come under pressure following due to rising COVID-related loan loss provisions, shrinking margins as a result of the low interest rate environment, and slowing loan growth due to economic contraction resulting from the pandemic and low oil prices.
UAE brokers face drastic drop in commissions after new rules on life insurance policy sales 
Insurance brokers in the UAE will take a deep hit on their revenues with a new commission payment structure coming into effect on all insurance policies from October 15. They are now asking the country’s insurance industry regulator for a review of the new payment regime, which brokers say will even affect their business continuity. “We keep looking at our bank statements from the last two to three days… and the changes in commission payouts is stark,” said a broker. “If they were used to getting Dh100 earlier, now that’s come down to Dh7.5…” In simple terms, it means that fees/commissions generated from selling a life or savings policy will be paid to the broker over the tenor of the premium payment.
Commodity Tracker
Stock Market Update
CRIF D&B Business Update
Dun & Bradstreet Enters Into Agreement to Acquire Bisnode, a Leading European Data & Analytics Business
Dun & Bradstreet Holdings, Inc. (“Dun & Bradstreet” or the “Company”) (NYSE:DNB), a leading global provider of business decisioning data and analytics, through its subsidiary Dun & Bradstreet Holdings BV, today announced that it has entered into a definitive agreement to purchase the outstanding shares of Bisnode Business Information Group AB (“Bisnode”), a leading European data and analytics firm and long-standing member of the Dun & Bradstreet Worldwide Network. The estimated purchase price upon closing is 7.2B SEK or approximately $818 million USD. The transaction is expected to close in January 2021, subject to required regulatory approvals and customary closing conditions.
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