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Credit market 'resilient' despite financial turmoil

The credit environment in the Middle East "should remain resilient” next year despite continuing widespread global market turmoil, a leading credit rating agency said on Thursday.

With only three weeks of 2007 remaining the majority of Gulf companies can breathe a sigh of relief heading into the New Year, according the latest report by Moody’s Investors Service.
"Although the market turmoil that began in August 2007 is likely to lead to a moderate reduction of economic growth in 2008, the credit environment should remain resilient in the non-financial corporate sector in Europe, the Middle East and Africa (EMEA)," the agency said.

Moody’s explained, however, that a significant worsening of economic conditions would “undoubtedly” restrict the financial flexibility of a number of corporate issuers, notably those within cyclical industries or with highly leveraged capital structures.

It expects a number of sectors including packaged goods and drinks, telecoms, and mining to experience continued corporate activity, but at a reduced pace.

However, it added that the solid financial condition of many companies and the expected continued growth in developing markets - sustained in certain industries by strong order books - should allow these companies to continue to perform well and deal with potential economic stress.

Moody's identified four key structural trends that represent challenges to corporate players in EMEA over the coming year.

These trends include the continuing weakening dollar, the potential decline in growth of China and other developing markets, the impact of energy and commodity prices, the extent to which individual players have the ability to influence prices, and the problems infrastructure and utility companies in some countries face securing to long-term capital.

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