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Reading: Difficult operating environment expected in GCC region: Alix Partners
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Dailynewsegypt > Blog > Business > Difficult operating environment expected in GCC region: Alix Partners
Business

Difficult operating environment expected in GCC region: Alix Partners

Daily News Egypt
Last updated: 2016/01/07 at 12:41 AM
By Daily News Egypt 3 Min Read
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Internal and external economic challenge influence GCC corporations Alix Partners
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A mix of international and local financial factors could spell a difficult operating environment for the Gulf Cooperation Council (GCC) corporations in the upcoming period, according to a report published by international consulting firm Alix Partners.

The report said factors included the decline in oil prices, a drop in other commodity prices, low global interest rates, a declining gross domestic product (GDP) in China, the recession in Brazil, and emerging markets. Put together, the report says these factors could lead to a “possible downturn” in GCC.

“The signals are internal from within the region—and ones driven by external economic developments on an international scale,” the report said and that GCC economies are highly vulnerable to global economic fluctuations.

“Although GCC countries differ significantly in their debt levels and financial reserves, all are witnessing declines in export revenues and foreign direct investments,” the report said. “To varied extents, they are all drawing on their fiscal reserves, using available financing avenues to blunt these effects, and implementing major budget cuts to counteract the regional drop in revenue.”

The firm stated that global factors coupled with regional political instability have led GCC countries to implement fiscal policies that could help cut subsidies, control expenditure, and set reforms to preserve national wealth.

These policies have had a constricting effect on the private sector, which is already experiencing difficulty in accessing funds and facing increasing costs.

“It [tightening policies] triggers financial pressures on companies heavily dependent on governmental spending and companies closely related to the oil and gas industries,” the report said. “Eventually, this might cascade down to many other industries only indirectly related to the oil and gas and government sectors, which account for the vast majority of regional country GDPs.”

GCC countries were strong supporters of Egypt following the ousting of former Islamist president Mohamed Morsi. Saudi Arabia, Kuwait, and the UAE pledged $12bn in economic assistance. The pledged package included grants, deposits at the Central bank of Egypt (CBE), and petroleum products.

During the opening ceremony of the Egypt Economic Development Conference (EEDC) in March 2014, the same counties promised an additional $12bn, divided into $6bn for CBE deposits and $6bn in investments.

Egypt is yet to receive any of the $6bn in foreign direct investments, Finance minister Hany Dimian told the Daily News Egypt last October.

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TAGGED: GCC, Gulf Cooperation Council
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