Agency says government backing for Gulf construction firms means a stable credit outlook for this year

Fitch Ratings has said that the credit outlook for construction and property firms throughout the Gulf in the year ahead is stable because many have government backing.

The credit rating agency, which has its headquarters in New York and London, said it was able to issue normal ratings because the majority of Fitch rated issuers are either fully or partially owned by governments.

It added: “They are likely to be able to rely on support from their respective sovereigns if required. Relevant issuers' ratings could thus be revised if a sovereign's rating changes.”

Fitch's forecasts cover the six members of the Gulf Co-operation Council, which features the UAE states, including Dubai and Abu Dhabi, as well as Bahrain, Oman, Kuwait, Qatar and Saudi Arabia.

Fitch admitted that construction and property will fare worse in the face of the continuing slowdown than it has done for some time, especially in Dubai.

But the firm said that companies in the two sectors should be able to generate sufficient operational cash flow to support upcoming debt.

It said: “The sector can conserve cash by curtailing development plans. Projects already under construction are expected to continue being built out until early 2010. However, if evidence emerges that the current downturn is significantly more severe than anticipated, this could result in negative pressure on issuer's credit profile.”