GCC finance needs to be $560bn


GCC governments will need financing worth $560bn in 2015-19 as a result of lower oil prices, S&P Global Ratings said in a report published today.

“We estimate that, in nominal terms, GCC sovereigns’ combined fiscal deficit will reach $150bn (12.8 per cent of combined GDP) in 2016 alone,” S&P said. “As a proportion of GDP, we expect that in 2016-2019 these deficits will average around 10 per cent per year in Bahrain, Oman, Kuwait, and Saudi Arabia, and 4 per cent on average in Abu Dhabi and Qatar.”

“We forecast that the cumulative funding requirement could be as high as $560bn between 2015 and 2019,” S&P said. “The resulting imbalances and their likely impact have been central to our view of a significant deterioration in the region’s creditworthiness over the past 18 months. Although most governments’ balance sheets remain a rating strength, the related assets are finite. Furthermore, international liquidity sources could start to dry up at a time when foreign inflows are most needed and the liquidity of domestic banking systems is diminishing. This creates uncertainty about how, and at what price, GCC sovereigns will cover their fiscal deficits.”

The IMF said last week that it estimated that Saudi Arabia alone will need financing worth $389bn in 2016-21.

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