Weaker oil output to put pressure on GCC deficits, says Moody’s
GCC countries this year will face weaker oil output compared to 2018 levels, due to the production cuts agreed by OPEC+ nations in December, according to Moody’s Investors Service.
‘Along with lower oil prices, weaker oil output will put pressure on fiscal deficits and weaken external positions, especially in Bahrain, Oman, Saudi Arabia and Kuwait, leading to faster debt accumulation than we previously expected’, Moody’s said in its GCC Sovereigns report released on Wednesday.
The ratings agency expects oil prices to remain moderate over the medium term, which will weaken GCC sovereigns’ fiscal positions. ‘We expect oil prices to average US$62 per barrel in 2019 and 2020, around the midpoint of our US$50-70 medium term projection range and down from the US$71 per barrel average in 2018’.
In 2019, Moody’s expect fiscal deficits will widen by 6.9 per cent of GDP in Kuwait, 3.7 per cent in Oman, and one per cent in Saudi Arabia, compared to its estimates for 2018.
‘In Qatar and the UAE, where we previously expected budgetary surpluses in 2019, we now project small fiscal deficits. In Bahrain, fiscal deterioration on account of more moderate oil prices will be more than offset by consolidation under the GCC support programme’, Moody’s said.
It said that higher budgetary spending will support a modest acceleration in non-oil growth in most GCC countries. ‘Despite weaker overall economic expansion, the expected acceleration in non-oil growth will help to cement popular support for ongoing gradual reforms and to curb increases in unemployment.’