The Gulf Cooperation Council (GCC) will witness a modest economic recovery during the period of 2021 to 2023. According to the US-based credit rating agency S&P Global Rating, GCC will see a gross domestic product (GDP) growth of 2.5 percent during the period. S&P further predicts an average Brent oil price of $60 in 2021 and 2022 and $55 in 2023.
Trevor Cullinan, Lead Analyst GCC Sovereign Ratings at S&P told the media, “Higher oil prices are supportive of GCC states fiscal balances. However, most GCC states are likely to continue to post central government deficits in 2021 and their balance sheets are therefore likely to continue to weaken, albeit at a slower pace.”
“GCC governments reforms are largely based on improving the efficiency of government spending and diversifying their revenue streams away from the volatile hydrocarbon sector, which includes introducing new taxes such as VAT.”
S&P further revealed through its report that the UAE recorded a sharper economic contraction in 2020 compared to the Kingdom of Saudi Arabia. This is attributed to weaker economic activities in Abu Dhabi and Dubai, according to Trevor Cullinan. Abu Dhabi was hit by low oil prices last year. When compared to Saudi Arabia, the UAE is more dependent on the oil sector. It contributes about 50 percent of real GDP compared with about 40 percent for Saudi Arabia.
However, he added, “With this said, the aggressive vaccine program in the UAE is clearly positive for the event, and should provide a platform for economic recovery.”