Mubasher: The creditworthiness of GCC economies is not expected to rise on the back of the recent oil price recovery, as it is mainly based on the governments’ response to different economic, fiscal, and external challenges, according to a new report.

Moody's data showed that oil prices are expected to reach an average of $60 per barrel (pb) in 2018 and 2019, before decreasing to $55 pb afterwards.

This improvement will result in reducing fiscal deficits and slowing government debt build-up in the GCC while boosting external liquidity and mitigating the decline in foreign-exchange reserves and sovereign wealth funds' (SWFs) assets. 

"Our expectations for the evolution of sovereign credit profiles have not changed with higher oil prices in recent months," comment Moody's analyst Thaddeus Best. However, the positive fiscal and external balance figures, especially after deducting oil and gas revenues, are not enough to support the GCC rating, Moody's revealed.

"The sovereign ratings and outlooks depend on the ability of GCC sovereigns to address structural vulnerabilities and diversify their economies and fiscal revenue sources away from hydrocarbons,” Thaddeus said.

Kuwait and Qatar are forecast to record 5% budget surpluses and a gross domestic product (GDP) growth of 2.7% in 2018, while Saudi Arabia, Bahrain, and Oman will register fiscal deficits of 5.8%, 10.2% and 9.4% of their GDP, respectively, according to the report.