Wednesday 30 September 2015

Fiscal adjustments unlikely to fill growing budget gap of GCC governments | GulfNews.com

Fiscal adjustments unlikely to fill growing budget gap of GCC governments | GulfNews.com:

"The impact of fiscal policy responses by Gulf Cooperation Council (GCC) sovereigns to lower oil prices are likely to be small compared to the loss of revenues over 2015 and 2016, according to Fitch Ratings.

Some policy responses deployed by other oil exporting-sovereigns are harder to enact, or carry greater risks for GCC sovereigns. For example, the rating agency do not expect any change to exchange rate pegs in the region to ease fiscal adjustments. Pegs are key nominal anchors against inflation, are backed by huge reserves and receive strong political commitment, and the private sector has no experience of exchange rate volatility.

Low oil prices are having a negative impact on the GCC sovereign ratings; this is primarily because the low oil prices are causing a deterioration in their fiscal positions and in the external position."



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