GCC governments to raise record $100 billion in 2020: S&P

By Waheed Abbas

Published: Mon 20 Jul 2020, 5:04 PM

Last updated: Mon 20 Jul 2020, 7:14 PM

The GCC governments' debt issuances are expected to reach record high of $100 billion in 2020 as many sovereigns have posted sizeable deficits due to lower oil income, according to S&P Global Ratings.
The GCC governments raised over $90 billion debt in 2016 and 2017.
"We expect total GCC government debt to increase by a record-high of about $100 billion in 2020 alone, with an additional $80 billion run-down in government assets to finance an aggregate GCC central government deficit of about $180 billion. Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023," said Trevor Cullinan, credit analyst at S&P Global Ratings.
"We expect total annual debt issuance to trend down toward $70 billion by 2023, largely driven by our expectation of a narrowing of Saudi Arabia's fiscal deficits over the period," he added.
S&P estimates GCC sovereigns' central government deficits will reach about $490 billion cumulatively between 2020 and 2023. About 55 per cent of this deficit relates to Saudi Arabia, followed by Kuwait with 17 per cent and Abu Dhabi with 11 per cent.
Cullinan expects that debt issuance will meet about 60 per cent of the $490 billion financing requirement in 2020-2023.
"We expect that Bahrain, Oman, Qatar, and Saudi Arabia will finance the vast majority of their deficits through debt, while Abu Dhabi and Kuwait will draw more on their assets," he added.
S&P sees fiscal deficits will shrink from 2021 given its assumption that oil prices will improve and the tapering of oil production cuts in line with the April 2020 Opec+ agreement. "We assume an average Brent oil price of $30 per barrel for the rest of 2020, $50 in 2021, and $55 from 2022, relative to $64 in 2019," added Cullinan.

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