GCC: Fiscal outlook

Lower oil prices will drag on budget balances across the GCC. Our new forecast of an average USD 68/b this year is below our weighted average fiscal breakeven oil price of USD 74/b across the GCC (excluding Qatar) meaning that the bulk of the bloc’s economies will see wider budget deficits this year than we had previously envisaged: we now see a weighted average budget deficit equivalent to 3.6% of GDP this year, compared with an estimated shortfall of just 1% of GDP in 2024.

Despite the extra pressure on budgets, the negative impact on non-oil growth will be relatively limited in the near term at least, with regional economies benefitting from investment programmes related to diversification strategies. The current downward pressure on oil prices highlights the importance of these investment plans and of the ongoing efforts to widen the tax base through the introduction of VAT and CIT in recent years. Moreover, with debt levels low throughout the bloc, there remains substantial room to cover budget deficits through borrowing.

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