Since 2014, lower oil prices have prompted the Gulf Cooperation Council (GCC) governments to launch fiscal consolidation programmes spending cuts, energy price reforms and economic diversification measures.
Thursday 15, August 2019
Moody’s said that although policy measures have slowed fiscal deterioration linked to lower oil prices in the GCC, most Gulf sovereigns will continue to run fiscal deficits and accumulate debt if prices remain moderate as expected.
In a report, Moody’s stated that the implementation of fiscal consolidation measures and reforms has been uneven across the six GCC sovereigns and has so far been more concentrated on the expenditure side.
GCC sovereigns undertook spending rationalisation exercises between 2015 and 2018—although less significant—most delivered some form of energy price reforms and introduced new non-oil revenue measures; however, progress has been uneven across the region and currently tilted toward spending cuts.
Additionally, the rating agency said that the deterioration in GCC sovereign balance sheets has been large and persistent, declines in net sovereign assets were most significant in Oman, Bahrain as well as Kuwait and Saudi Arabia—ranging between 45-60 per cent of GDP.
On the revenue, side progress has been slow and much less material, despite the implementation of new miscellaneous fees for government services by most of the GCC governments the measures added little to their overall revenue intake.
According to Moody’s, only three of the six GCC sovereigns (Saudi Arabia, the UAE and Bahrain) have so far implemented the five per cent value-added tax (VAT) that the Gulf countries agreed to implement in 2018.