Abu Dhabi, KSA, Kuwait have room to manoeuvre

Abu Dhabi, Saudi Arabia and Kuwait have the greatest amount of fiscal space which could help each state to sustain 10 per cent deficit without resorting to debt finance for at least 25 years, an analyst at Standard and Poor's said yesterday.

Farouk Soussa, credit analyst at S&P's, said: "We believe that GCC governments have exceptional fiscal space to implement their counter-cyclical expansionary policies, despite experiencing significant losses on their foreign asset holdings over the past 18 months.

"In our view, Saudi Arabia, Abu Dhabi, and Kuwait have the greatest amount of fiscal space to pursue such policies, and we forecast that each could sustain a 10 per cent deficit without resorting to debt finance for at least 25 years. Bahrain and Oman are in the least comfortable positions, as their oil resources are more limited than other GCC states and they have therefore benefited relatively less from the windfall in high oil prices in terms of accumulation of assets."