Debt issuance v asset drawdowns: The GCC's $300 billion conundrum | ZAWYA MENA Edition

Debt issuance v asset drawdowns: The GCC's $300 billion conundrum | ZAWYA MENA Edition:

The six members of the Gulf Cooperation Council will need around $300 billion in sovereign funding between 2018 and 2021, down from $450 billion between 2015 and 2017, as the oil price improves and governments push ahead with revenue-generating programmes such as the introduction of value-added tax (VAT), according to the latest forecast issued on Wednesday by S&P Global Ratings. (Click Read the full report here.)

The cumulative deficits of the six GCC states (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain) are forecast to be around $75 billion in 2019 (5.5 percent of total GCC gross domestic product), which is well below the high point of 2016 when deficits hit $190 billion and accounted for 16 percent of GCC GDP, the report added.

S&P Global Ratings said the shrinking deficits are due to two factors: oil and fiscal policies, such as the introduction of VAT in Saudi Arabia and the UAE. “The oil price has almost trebled from the $29 per barrel (/bbl) trough and is currently $80/bbl; that said, we assume the oil price will decline to $55/bbl by 2021,” the report said, adding that the lower oil price towards the end of the decade will mean the deficit reductions won’t be as sharp as some governments would like.