Standard & Poor’s has expected oil prices to reduce Gulf’s budgets deficit for the current year by the nearly the half.
The agency expected the deficit to decrease by 44% this year, to settle for $80 billion, after the deficit was $143 billion in 2020.
According to the agency, the deficit will decrease from 10% last year to 5% this year.
Gulf’s budgets deficit
Standard & Poor’s said that the expected decrease in the Gulf’s budgets deficit comes with support from high oil prices and fiscal stabilization measures taken by governments.
Trevor Cullinan, credit analyst at Standard & Poor’s, said there is an improvement in the level of economic activity coinciding with the lifting of the Coronavirus restrictions.
Earlier, credit rating agency Fitch said that the extended impact of the Coronavirus pandemic and the sharp decline in oil prices last year will lead to a financial deficit in most of the budgets of the Gulf countries during the current year 2021.
It is expected that countries of the region will witness an improvement in their financial conditions thanks to the recovery of global oil prices and the easing of production restrictions. However, the deficit will remain large, especially in Kuwait and Bahrain, according to Fitch.
Realization of redundancy
Only Abu Dhabi and Qatar are expected to achieve fiscal surpluses, according to the report.
The high oil prices needed to achieve fiscal balance show the size of the public financial reform challenges, most of which are still much higher than the current or expected oil prices, the report said.
Fitch expects Brent crude to reach an average of $58 this year, but its long-term forecast is at $53.
The agency estimates that Bahrain needs a price of around $100 a barrel to balance the 2021-2022 budget, Kuwait needs more than $80 a barrel, while Saudi Arabia and Oman need around $70.
Brent crude is currently trading at around $66.
The year 2020 witnessed successive economic crises around the year. The most prominent of which was the drop in oil prices and their great effects on all Gulf countries, to varying degrees.
Keep reading: Gulf Markets Gain Profits Supported By Oil Prices
