Credit rating agency Moody's is still cautious on Gulf corporates as political turmoil weighs on the region despite a broader recovery under way currently, it said in a report.

Moody's said the wave of ratings downgrade seen during the peak of the financial crisis in the Gulf markets has abated even though moderate pressure is likely to be seen in 2011.   

"The risk of downgrades remains highest for lower-rated issuers, typically in the non-investment-grade spectrum, due to their need to refinance upcoming debt maturities and in some cases continue restructuring their real estate exposures," David Staples, managing director for corporate finance for Moody's said in the report.   

The ratings agency warned that any changes in government support or in the stability of the economic environment can have a major impact for government-related institutions.  

"In this respect Moody's believes that the Dubai-based government-owned companies collectively known as "Dubai Inc." remain a key area of focus," it said in the report.

In a separate report, the ratings agency said state-owned companies in the oil-rich emirate of Abu Dhabi are very likely to see support from the government. It highlighted the recent bailout of struggling real estate developer Aldar Properties by the government. 

Abu Dhabi stepped in with $5.2 billion of support for struggling developer Aldar Properties, including buying some of its key assets and subscribing to a bond sale in January. -Reuters