COVID-19, moderate oil price will leave most of Gulf in the red this year: Fitch

DUBAI (Reuters) – The lingering impact of the COVID-19 pandemic and the sharp drop in oil prices last year will leave most Gulf governments with deficits this year, rating agency Fitch said.

The countries of the region will see their finances improve thanks to a rebound in oil prices and the absorption of production cuts.

But deficits will remain high, especially in Kuwait and Bahrain. “We expect only Abu Dhabi and Qatar to run budget surpluses,” Fitch said in a report.

“The high balanced oil prices illustrate the scale of the challenge of public finance reform and for the most part remain well above current or forecasted oil prices.”

Fitch expects average Brent oil prices of $ 58 per barrel this year, but his long-term forecast is $ 53.

Bahrain would need a price of nearly $ 100 a barrel to balance its budget in 2021-2022, Kuwait over $ 80 and Saudi Arabia and Oman around $ 70, Fitch estimated.

Brent crude was trading around $ 66 a barrel on Tuesday. [O/R]

In addition to oil revenues, the coronavirus continues to weigh on the coffers of Gulf states, with some countries recently reimposing restrictions on economic activity.

“New waves of infections continue to hamper external revenues, public finances, jobs and GDP growth,” Fitch said.

He expects Abu Dhabi and Qatar to post budget surpluses of 1.1% and 2.4% of GDP, respectively. Saudi Arabia, the Gulf’s largest economy, is expected to post a deficit of 5.3%.