Gulf Cooperation Council (GCC) sovereigns will experience significant narrowing of fiscal deficits/GDP in 2021, said Fitch Ratings in a report on Tuesday.

Nevertheless, fiscal deficits will remain high, particularly in Kuwait and Bahrain. “We expect only Abu Dhabi and Qatar to eke out fiscal surpluses. Persistent deficits elsewhere will lead to continued debt issuance and/or drawdowns of assets, although sovereign assets remain sufficient to finance prolonged deficits in the higher-rated sovereigns,” it said.

Fitch has placed Jordan, Kuwait, Oman, Saudi Arabia and Tunisia on Negative Outlook, reflecting the lingering hit to public and external finances and growth as a result of the COVID-19 pandemic and the fall in oil prices last year, as well as liquidity and funding uncertainties in Kuwait and Tunisia.

The ratings agency’s forecasts assume average Brent oil prices of $58 per barrel (bbl) in 2021, accompanied by further unwinding of OPEC+ production cuts beyond the 2.1 million barrel increase already announced for May-July, “although average oil output will still likely end up below 2020 levels.”

Meanwhile, the report said the impact of the pandemic is likely to be felt in 2021, as renewed waves of infections continue to hamper external receipts, public finances, employment and GDP growth.

Any economic rebound will depend on ending the pandemic elsewhere, particularly in Europe as tourism accounts for 10 -20 percent of GDP across MENA’s non-oil economies, the agency noted.

(Writing by Brinda Darasha; editing by Seban Scaria)

brinda.darasha@refinitiv.com

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