Moody's Investor Services expected significant negative credit repercussions on all sovereign bodies in the Middle East if the military conflict in Gaza escalates into a multi-front confrontation.
The agency emphasized, however, that the credit impact if the conflict remains confined to Gaza, would be limited to the Middle East and North African governments (MENA).
"Geopolitical developments remain a key risk," stated Moody’s.
Moody's projects a GDP growth of 2.7% in MENA for 2024, a notable increase from the 1.1% recorded in 2023. Excluding the volatile growth associated with the oil and gas sector, the real GDP of the region is estimated to reach 3.1%, slightly down from the 3.4% observed in 2023.
The agency points out that economic activity in Saudi Arabia, UAE, Jordan, Kuwait, Morocco, Oman, and Qatar is expected to benefit from implementing state-backed mega-projects. The growth of non-oil GDP in 2024 is forecasted to outpace levels observed in 2018 and 2019, excluding Egypt and Iraq.
“Moody’s outlook for sovereign creditworthiness in MENA is stable,” it added.
However, it noted that high-interest rates and restricted capital inflows in emerging markets could impede debt sustainability and limit foreign funding for sovereign bodies. This concern is particularly pertinent in the face of economic challenges in Egypt, Lebanon, and Tunisia.
