While conflicts such as the ongoing Iran-Israel-US war present clear risks, they may also give rise to emerging opportunities, says global professional services provider KPMG.
In a whitepaper titled “Beyond Recovery”, KPMG commented on post-conflict challenges, shifts, and emerging opportunities across key sectors in Qatar, including the financial sector. The paper said that the current regional conflict represents the most severe multi-modal shock to Qatar's economy since the 2017 GCC blockade.
According to the whitepaper, the opportunities in the financial services sector, particularly when supported by proactive government interventions and support, include:
1) Liquidity
-
Enhanced liquidity through potential resilience and stimulus packages, some of which, based on recent local and regional precedents, may include favoruable repo rates, enhanced access to reserves, and regulatory reliefs on liquidity ratios. Further, special lending window facilities and FX swap lines could also boost overall liquidity.
-
Persistent higher energy gas prices may increase fiscal revenues, which may enhance the liquidity of Qatari energy and GRE companies. Parking such enhanced liquidity in the local banking system may improve liquidity in the banking sector over time.
2) Financial market risk
-
Despite increase in general risk perception, within the GCC, Qatar has been relatively more resilient and stable, which could in fact witness capital reallocation from riskier GCC equity and bond markets to Qatar government bonds. The medium to long term could see a revival of IPOs / listings in the energy sectors.
-
Further, there could be opportunities for potential sovereign sukuk issuance, acceleration of green & sustainable finance issuance. Also, SWFs and related investment companies could support local equity and bond markets through active participation, especially during sell-offs. There could also be higher activity in commodity & derivative markets to hedge oil price volatility, manage FX, commodity hedging, structured derivative products, etc.
3) Credit & default risk
-
Banks could launch specific products and financing solutions (takaful and non-takaful) designed to cover war-risk and supply chain-related disruptions. Further, banks can also offer structured emergency credit lines for SMEs and corporates affected indirectly by conflict.
-
Government schemes such as state-backed credit guarantees, targeted subsidies to certain impacted sectors, moratoriums, and capital buffer relief to facilitate credit lending activity have had successful precedents both regionally and globally to mitigate such risks.
4) Other opportunities
Infrastructure financing: Increased revenues of the government due to persistent high energy prices could see investment in specialized sectors such as defense and technology, ports, pipelines, food safety and storage and data infrastructure, etc., which may also open financing opportunities (project financing, syndicate loans for giga projects and PPP financing solutions, to name a few).
Digital Finance & Fintech: In line with the Third Financial Sector Strategic Plan of the Qatar Central Bank and the Qatar Financial Centre’s Digital Asset Framework to establish Qatar as a leading regional FintTech and digital finance hub, post conflict could see the potential to expand digital payments, cross-border settlements and digital trade financing solutions. Accordingly, FinTech regulatory sandbox to support digital trade finance solutions should be accelerated.