The budget deficits in GCC countries is set to peak in 2016 and taper thereafter, according to a recent report by KAMCO Research.

Budget gaps will remain over the medium term after recording an estimated $119 billion of budget deficits in 2015, mainly due to lower oil revenues, the report added.

“GCC budget deficits are forecasted to come in at over $153 billion in 2016, based on our analysis of IMF data for GCC countries.”

Budget deficits are likely to stay over the near future, as deficits of over $100 billion of deficits are expected each year until 2021, according to KAMCO’s analysis. Current account balance for the GCC is also expected to worsen in 2016, as the overall current account deficit (CAD) is expected to reach 6.6% of GDP.

KAMCO Research expects recalibration of growth initiatives in the region to spill over to 2017 In 2016, It further estimates GDP for the GCC region to drop by 2.2% year-on-year to $1.38 trillion, based on data from the IMF, lower than each of the previous five years.

Nevertheless, GDP for region is expected to grow over 2017-21, the report said, adding that the drop in overall output as a result of lower oil GDP has also triggered various spending controls for both current and capital spending from the various GCC economies.

Monetary indicators such as liquidity & inflation in the region still broadly positive Inflation trends reported for H1-16 suggested that consumer prices were broadly positive across GCC nations as inflation ranged between 1%-3% as of Jun-16 as against 2015.

Inflation in the GCC for 2016 is expected to come in at 2.8%, based on estimates. Data on credit disbursed across the GCC was also positive in the early part of the year, as quarterly lending grew by 1% and 2%, showed the report.