The fallout between Qatar and other three GCC states may disrupt financial flows in the Arabian Gulf at a time when state financing in the region is at a record high, the latest report from S&P Global Ratings suggests.
The rupture, while likely will cause a measure of economic pain to all the countries in the region, will be contained as the main source of revenue for GCC countries, hydrocarbons, won't be impacted by the crisis, the rating agency said.
"We expect that the impact of weaker relations on economic growth through reduced investment, regional trade, and lower corporate activity will intensify the longer the situation lasts but that the overall impact should be relatively limited," the report said. "The GCC countries are largely dependent on their hydrocarbon sectors."
The biggest threat to GCC economies, S&P said, would be capital outflows related to a drop in confidence or extensive financial sector sanctions.
The agency said that it had previously viewed the GCC as a stable political alliance in the Arab world as it held together during the global financial crisis and the Arab Spring. And in recent years the block has strengthened those ties through such initiatives as the planned introduction of value-added tax.
"In our view, these initiatives indicated a desire to ensure the political and financial stability of the GCC and its individual member states," S&P said. "While we do not think that this desire has changed significantly, in our view, the current tensions weaken the cohesiveness of the GCC and complicate policy predictability."
The rating agency expressed a lack of optimism that the dispute would be quickly resolved and said that it could last for several years, especially since the disagreement had revealed deeper divisions than were visible to the naked eye before the outbreak of the troubles.
The group of countries boycotting Qatar include Saudi Arabia, the UAE , Bahrain, Egypt, Libya and Yemen.
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