Arab states of the energy-rich Gulf are expected to accumulate USD 490 billion in deficits by 2023 due to the double hit of low oil prices and the coronavirus slowdown, Standard and Poors said Monday.
The six-nation Gulf Cooperation Council is estimated to post a combined budget deficit of USD 180 billion this year alone, the ratings agency said in a report.
It based its estimates on an average oil price of USD 30 a barrel this year, forecast to rise to USD 55 in 2022.
Government funding needs in the GCC -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) -- have increased significantly this year, S&P said.
"We expect total GCC government debt to increase by a record high of about USD 100 billion in 2020 alone," it said.
An additional USD 80 billion will be withdrawn from government assets, estimated at USD 2 trillion, to plug the budget shortfall.
"Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023," when deficits would have accumulated to USD 490 billion, it said.
The coronavirus pandemic has hit global oil demand hard, leading to a crash in oil prices to a two-decade low before a partial recovery.
The International Monetary Fund this month estimated the six GCC states stand to lose around USD 200 billion in oil revenues this year.
The IMF also forecast that GCC growth in 2020 would shrink by 7.1 percent, the lowest in almost four decades, as a result of the pandemic and low oil prices.
S&P said Saudi Arabia, the largest Arab economy, will account for 55 percent of the total GCC deficits, followed by Kuwait with 17 percent and Abu Dhabi with 11 percent.
Dubai, United Arab Emirates | AFP
Sign In