Gulf countries get fiscal leeway after OPEC+ extends output cuts | Reuters
Oil-rich Gulf Cooperation Council (GCC) countries, whose state coffers have been battered by the coronavirus crisis, are set to get some fiscal respite after OPEC and its allies last week agreed to extend most oil output cuts into April.
While lower output could weigh on the region’s overall growth this year, higher oil prices are set to curb deficits, providing some headroom for a potential boost to GCC economies recovering from the COVID-19 pandemic.
“These countries will still benefit from the higher oil revenue, as the forecast increase in oil price outweighs the lower output,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“The marked narrowing in the fiscal deficit with higher oil revenue gives further space to increase fiscal support to the economies.”
Oil prices jumped to their highest levels in more than a year last week after the OPEC+ decision. OPEC’s leader Saudi Arabia said it would extend its voluntary oil output cut of 1 million barrels per day for a third consecutive month, and that it would decide in coming months to gradually phase it out.
JPMorgan last week revised upwards its 2021 and 2022 Brent price forecasts by $3 and $2, respectively, to $67 a barrel and $74 a barrel.
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