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Saudi Arabia likely to account for 60% of GCC cumulative deficit – S&P

Saudi Arabia likely to account for 60% of GCC cumulative deficit – S&P
Aggregate GCC central government deficit seen at about $80 billion in 2021

Mubasher: Saudi Arabia is expected to account for 60% of the $355 billion cumulative deficit across the GCC states between 2021 and 2024, according to S&P Global Ratings.

Kuwait will likely follow with 25%, while the UAE and Oman are projected to represent 7% and 4%, respectively, of the GCC cumulative deficit.

S&P expected the aggregate GCC central government deficit to plunge to about $80 billion in 2021, accounting for 5% of the gross domestic product (GDP), compared to $143 billion in 2020 or 10% of GDP.

Kuwait meanwhile is foreseen to register the GCC’s highest central government deficit-to-GDP ratio of 20% in 2021, followed by Bahrain and the UAE at 6%. Saudi Arabia and Oman will likely register 5% and 4%, respectively, while Qatar will record 1%.

Lower deficits will be backed by higher oil prices, fiscal consolidation measures, and an increasing level of economic activity as COVID-19 restrictions are lifted. S&P expected an average Brent oil price of $60 per barrel (bbl) until the end of 2021, $60/bbl in 2022, and $55/bbl in 2023 and beyond.

“GCC sovereigns have demonstrated ready access to international capital markets and many have substantial pools of external liquid assets available to fund their fiscal deficits and support their economies in the face of external shocks,” according to the ratings agency.

Saudi Arabia is reportedly planning to raise nearly $55 billion in the coming four years through its privatisation programme to boost revenue and narrow the budget deficit that hit $79 billion in 2020.