GCC country deficits to fall sharply as oil prices rally, economy picks up

London, (Quantum Commodity Intelligence) – Gulf Cooperation Council countries' borrowing requirements will drop sharply in 2021 as economic activity picks up, oil prices rise and governments constrain spending, said S&P Global Ratings Wednesday.

GCC government deficits will fall to 5% of GDP, or about $80 billion, in 2021 from 10% of GDP, or $143 billion in 2020, S&P credit analysts led by Trevor Cullinan wrote in a report.

However, the relatively high levels of borrowing will still mean growing debt levels, noted the report.

Saudi Arabia will account for about 60% of the cumulative $355 billion deficit across the six nations between 2021 and 2024, followed by Kuwait with 25% and the UAE at 7%, S&P said.

Kuwait will register the largest deficit this year, at 20% of GDP, followed by Bahrain and the UAE at 6%, Saudi Arabia at 5%, Oman at 4% and Qatar at 1%.

The calculations are for central government only and do not include sovereign wealth funds or state-owned enterprises.

GCC governments issued a combined $70 billion of debt in 2020, compared with $90 billion in 2016 and $100 billion in 2017, S&P said. Issuance will average $50 billion a year between 2021 and 2024, it estimates.

Oman oil futures trading on the Dubai Mercantile Exchange have averaged around $62.00 per barrels to date in 2021, according to exchange data, compared to the corresponding period in 2020 of around $42.50/b.

DME Oman futures for July settled at $66.85/b on Wednesday.