Globally renowned credit rating agency S&P Global Ratings has projected an average economic recovery for the GCC region from 2021 to 2023 with a 2.5 percent real GDP growth, following a drop of close to 6 percent in the previous year.
The GCC region or bloc comprising of 6 nations namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE has seen each country suffer differently from the other, driven by their policies and measures to tackle the effect of COVID-19.
Sharing his outlook about the region, S&P’s Lead Analyst for GCC Sovereign Ratings Trevor Cullinan remarked that “Higher oil prices are supportive of GCC states fiscal balances. However, most GCC states are likely to continue to postcentral government deficits in 2021 and their balance sheets are therefore likely to continue to weaken, albeit at a slower pace,”
The ratings agency has used $60 as the base price of Brent oil in 2021 and 2022 for the assessment with rates projected to remain stable at $55 in 2023 and beyond.
Mr. Cullinan stated that GCC nations have had comparatively easier access to international capital markets to raise debt in recent years. Many of them have depended on their banking systems as well as the significant liquid assets at their disposal to meet their fiscal goals.
“GCC governments reforms are largely based on improving the efficiency of government spending and diversifying their revenue streams away from the volatile hydrocarbon sector, which includes introducing new taxes such as VAT,” Mr. Cullinan added.
The S&P official sees the recent restoration of ties between Qatar and the four Arab countries as a stimulus to better political and economic cooperation within the GCC region.
“That said, we believe the damage done by the three-year boycott of Qatar to the GCC’s political cohesiveness is likely to remain. We expect that the resolution of the boycott will support improvement in the region’s broader business and investment environment. In our view, Qatar’s intraregional travel, tourism, and real estate sectors will benefit most, although the impact on bilateral trade could be marginal,” Mr. Cullinan stated.
The S&P official pointed out that bilateral trade among GCC nations is expected to remain limited due to the region’s dependence on hydrocarbons exports and the lack of strong agriculture or manufacturing sectors in the region.