By Sarah Townsend
Low oil price leads to Gulf-wide credit squeeze, says consultancy Markaz
UAE listed companies’ earnings dropped by 8 percent year-on-year in the first half of 2016 as low oil prices and weak economic growth impact performance.
Research by Kuwait Stock Exchange-listed Kuwait Financial Centre (Markaz) found the decline was led in particular by real estate companies, whose earnings dropped by 4 percent compared to the same period last year “owing to poor business sentiments and stagnant sales”, it said.
UAE corporate earnings are expected to fall by 3 percent in the second half of the year as a Gulf-wide credit squeeze takes its toll on the banking sector, the research added.
Across the GCC, corporate earnings fell by 8 percent year-on-year in the first half of 2016 with the exception of Oman, which registered 7 percent growth.
Total earnings stood at $32.8 billion, driven mainly by the telecoms and financial services sectors.
However, banking sector earnings remained flat and commodities, real estate and construction-related sectors all contracted largely due to the impact of low oil prices.
In Qatar, earnings fell by 11 percent, affected by a substantial, 50 percent fall in real estate sector earnings, while telecoms and banking held up with earnings increases of 35 percent and 3 percent respectively. Full-year earnings are expected to be flat.
Saudi Arabia recorded a 7 percent decline in net earnings during the period, Markaz found, with earnings declining for all sectors except financial services with the most dramatic fall in the real estate sector (-50 percent). Full-year earnings are expected to fall by 6 percent.
Meanwhile, in Kuwait, corporate earnings declined by 6 percent with commodities, real estate and financial services declining by 11 percent, 23 percent and 53 percent respectively. Full-year earnings are expected to fall by 2 percent.
Total full-year earnings across the GCC are expected to fall by 4 percent, according to the research.