The gross domestic product (GDP) of the gulf nations will contract sharply this year, however, they are set to recover in 2021, a poll carried out by Reuters revealed.
The economic contraction for the Gulf countries will be caused by the Covid-19 pandemic as well as the depleting oil prices.
Analysts participating in the poll see a deep economic contraction in the hydrocarbon-producing region this year as oil prices were hit on the supply and demand sides simultaneously.
Saudi Arabia, which is one of the biggest oil-producing nations in the region, witnessed its GDP shrink by 5.2 percent this year, however, it is set to rebound by 3.1 percent next year.
The International Monetary Fund (IMF) predicted that COVID-19 lockdowns and the fall in oil prices would shrink the Saudi GDP by 6.8 percent this year.
Maya Senussi, senior economist at Oxford Economics told the media, “Three months ago, most forecasts didn’t yet factor in the oil production cuts or the full extent of the COVID-19 fallout.”
She added that limiting the hajj pilgrimage, an important source of tourism revenue, also weighed on Saudi Arabia’s outlook.
For UAE, analyst predict a 5.1 percent contraction this year and a 2.6 percent growth in 2021.
The depleting oil prices and Covid-19 crisis would result in governments in the Gulf Cooperation Council (GCC) region increasing their borrowings by a record-high of approximately $100 billion this year.
“We expect total GCC government debt to increase by a record-high of about $100 billion in 2020 alone,” S&P credit analyst Trevor Cullinan said in a statement.
“We expect to see GCC government balance sheets continue to deteriorate up until 2023,” he added.