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The coronavirus pandemic, coupled with low oil prices, will result in governments in the Gulf Cooperation Council (GCC) region increasing their borrowings by a record-high of approximately $100 billion this year.
The Gulf states’ balance sheets will also continue to take a hit from the financial fallout up until 2023, with the deficits reaching about $490 billion cumulatively between 2020 and 2023, S&P Global Ratings said.
In its report released on Monday, the ratings agency noted that Saudi Arabia accounts for a huge chunk of the deficit in nominal terms. However, as a percentage of gross domestic product (GDP), Kuwait tops the charts, with a deficit-to-GDP ratio of 39 percent, followed by Oman (17 percent), Saudi Arabia (15 percent), Abu Dhabi (13 percent), Bahrain (12 percent) and Qatar (10 percent).
Funding requirements of GCC governments, which have rolled out emergency relief packages to contain the economic impact of the outbreak, have risen “sharply” this year, further widening fiscal deficits.
“We expect total GCC government debt to increase by a record-high of about $100 billion in 2020 alone,” S&P credit analyst Trevor Cullinan said in a statement.
“We expect to see GCC government balance sheets continue to deteriorate up until 2023,” he added.
The outbreak has been described as a “rare disaster” that has wreaked havoc on many economies worldwide. The International Monetary Fund (IMF) estimated that, due to the negative impact of COVID-19, global economic growth in 2020 will fall by 4.9 percent.
“This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods,” said Gita Gopinath, the economic counsellor and director of the research department at the IMF.
The IMF had also earlier cautioned governments against racking up huge public borrowings.
Governments in the GCC have rolled out a series of relief packages to help businesses stay afloat during the pandemic. Just this month, Dubai unveiled a new emergency relief package worth 1.5 billion UAE dirhams ($408 million), the third tranche announced since the outbreak started.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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