Fitch Credit rating agency revealed that the OPEC + agreement to reduce oil production will push Gulf governments’ budgets to record more fiscal deficits, indicating that production cuts will contribute to a severe contraction in economic output, along with a recession in the non-oil sector.
The agency expected that the size of the deficit in the countries of the region will range between 15 to 25 percent of GDP during the current year, except for Qatar, which is likely to achieve a deficit of about 8 percent, stating that these expectations come on the assumption that the average price of Brent mix is 35 Dollars per barrel, with full commitment to the "OPEC +" agreement, in addition to additional cuts by Saudi Arabia, Kuwait, and Abu Dhabi, until the end of the year.
According to "Fitch", the oil production will decrease by 10 percent from what it was last year, indicating that most of the oil parity prices for the Gulf countries range between 65 to 75 dollars per barrel, with the exception of Qatar, which is about 53 dollars, and Bahrain 94 dollars.
According to the agency, the announced production cuts may be insufficient to support prices, and in the event of a decrease of $ 10 per barrel in average prices this year, the deficit will rise by 4 to 6 percent of the GDP of the countries of the region with the exception of Kuwait, which will have a deficit of 9 Percent of GDP.
The agency expected to expand the production reduction by 5 percent, fiscal deficit by 1 to 2 percent of total output, with much less impact on Bahrain and Qatar.
Source (Al-Rai newspaper-Kuwait, Edited)
