Mideast fiscal regimes risk social backlash next year - Fitch | Reuters

Mideast fiscal regimes risk social backlash next year - Fitch | Reuters

Middle East countries that have adopted painful fiscal measures to contain the impact of the coronavirus crisis on their finances risk political and social backlash next year in the absence of economic improvements, ratings agency Fitch said.

After a severe contraction this year, most economies in the region are expected to bounce back to growth as oil prices recover and stimulus spending for the COVID-19 pandemic eases.

However, “lower-for-longer oil prices and other potential consequences of the pandemic raise questions about the long-term social and economic models of the Gulf Cooperation Council (GCC),” Fitch said in a report this week.

“Painful fiscal adjustments and the economic dislocation from coronavirus-containment measures risk a social and political backlash in 2021 in the absence of economic opportunities and improved living standards to satisfy still rapidly growing, young and under-employed populations,” it said.

Saudi Arabia, the largest Arab economy and the world’s biggest oil exporter, tripled a value-added tax this year to 15% to offset the blow to its finances of lower oil prices.