Debt levels of government-related entities in GCC remain elevated - Fitch | ZAWYA MENA Edition

Debt levels of government-related entities in GCC remain elevated - Fitch | ZAWYA MENA Edition

Government-related entity (GRE) debt as a share of GDP has declined across the GCC in 2021, due to higher oil prices and incipient recovery from the pandemic. However, in most of the GCC states, GRE debt levels remain higher than before the pandemic, according to a report by Fitch Ratings.

"The upward trend in GRE debt/GDP that has been in evidence since 2014 could resume as GREs help to drive national economic agendas, aiming at job creation, diversification and the energy transition," the report said.

However, increased focus on privatisation and asset sales could mitigate this trend over time, Fitch noted.

Aggregate GCC non-bank GRE debt hit 37 percent of GDP in 2020 (an increase of 7pp over 2019), driven in part by declines in nominal GDP on lower oil prices and Covid-19-induced recessions. The ratio is 32 percent in relation to forecast 2021 GDP.

Aggregate debt of GCC government-related banks rose to 24 percent of GDP in 2020. However, potential contingent liabilities from banks are larger. For instance in Qatar, sector assets reached above 300 percent.