Dubai — Arab states of the energy-rich Gulf are expected to accumulate $490b in deficits by 2023 due to the double hit of low oil prices and the coronavirus slowdown, S&P Global said Monday.

The six-nation Gulf Co-operation Council (GCC) is estimated to post a combined budget deficit of $180bn in 2020 alone, the ratings agency said in a report.

It based its estimates on an average oil price of $30 a barrel this year, forecast to rise to $55 in 2022.

Government funding needs in the GCC — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — have increased significantly this year, S&P said.

“We expect total GCC government debt to increase by a record high of about $100bn in 2020 alone,” it said.

An additional $80bn will be withdrawn from government assets, estimated at $2-trillion, to plug the budget shortfall.

“Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023,” when deficits would have accumulated to $490bn, it said.

The coronavirus pandemic has hit global oil demand hard, leading to a crash in oil prices to a two-decade low before a partial recovery.

The International Monetary Fund (IMF) in July estimated the six GCC states stand to lose about $200bn in oil revenues in 2020.

The IMF also forecast that GCC growth in 2020 would shrink by 7.1%, the lowest in almost four decades, as a result of the pandemic and low oil prices.

S&P said Saudi Arabia, the largest Arab economy, will account for 55% of the total GCC deficits, followed by Kuwait with 17% and Abu Dhabi with 11%.


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