Real GDP growth in the GCC in 2017 and 2018 is expected to remain weak with an average of 1.6 percent as the region continues to face fiscal pressures and structural reforms, Moody's Investors Service said in a recent report.
Moody’s expects the region’s aggregate fiscal deficit to narrow to 7.5 percent of GDP in 2017 and 4.9 percent in 2018, from 8.8 percent of GDP in 2016 and 8.7 percent of GDP in 2015.
“Challenges to fiscal deficit reduction stem from potential slipping of fiscal consolidation measures in the face of social pressures.” said Mathias Angonin, an analyst at Moody's.
Saudi Arabia’s real GDP growth is expected to be around 0.7 percent. With fiscal deficits remaining sizeable, the kingdom will continue to issue debt and use reserves.
The UAE will likely record relatively low fiscal deficits of 3 percent to 4 percent of GDP in 2017, as it will also likely issue debt and make use of government reserves. UAE’s debt burdens will be stable in 2017 due to pre-financing part of its debt, while in 2018 it will decline.
“Saudi Arabia and Bahrain will record the largest increase in debt between 2016 and 2018, with the government debt-to-GDP ratio rising by around 14 percentage points. For Oman and Kuwait, Moody's expects lower debt increases of around 8-9 percentage points of GDP,” the report added.
Moody’s expects Qatar and Bahrain will continue to rely solely on market funding, while Oman and Kuwait, UAE, and Saudi Arabia will issue debt and use government reserves.
Meanwhile, GCC government financial assets will likely decline to $2.1 trillion by the end of 2017, down from $2.4 trillion in 2014.
The debt-to-GDP ratio across the GCC will rise to 31.6 percent by 2018 compared to 10.5 percent in 2014.
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