S&P: GCC government debt to surge by record-high $100 billion this year

Kuwait is planning to raise up to $16 billion by the end of its current fiscal year, ending in March 2021. (AFP file photo)
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Updated 20 July 2020

S&P: GCC government debt to surge by record-high $100 billion this year

  • S&P estimates GCC central government deficits to reach about $490 billion cumulatively between 2020 and 2023
  • Since the oil price crash in 2014-2015, Gulf states have relied heavily on debt financing

DUBAI: S&P Global Ratings said on Monday it expected Gulf countries’ government debt to increase by a record high of about $100 billion this year, as funding needs spike due to the coronavirus crisis and low oil prices.
The ratings agency estimates Gulf Cooperation Council (GCC) countries will register an aggregate central government deficit of about $180 billion, to be financed with $100 billion of debt and an $80 billion draw-down in government assets.
“Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023,” it said in a statement.
It based its forecasts on an average Brent oil price of $30 per barrel for the rest of 2020, $50 in 2021 and $55 from 2022.
Gulf countries have been hit hard by the pandemic and lower oil prices have exacerbated that, with most countries expected to post double-digit fiscal deficits this year.
Saudi Arabia, Qatar, Bahrain and the emirates of Abu Dhabi and Sharjah have already borrowed tens of billions of dollars this year to bolster state coffers.
S&P estimates GCC central government deficits to reach about $490 billion cumulatively between 2020 and 2023.
Since the oil price crash in 2014-2015, Gulf states have relied heavily on debt financing, raising over $90 billion in local and international debt in 2016 and 2017.
After a new record high of about $100 billion this year, S&P expects total debt issuance to decline to around $70 billion by 2023.
Oman, one of the financially weakest countries in the Gulf, has not raised international debt yet this year but S&P expects it to do so in the coming months.
Kuwait is planning to raise up to $16 billion by the end of its current fiscal year, ending in March 2021, but its ability to borrow depends on parliament approving a long-debated new debt law.


Thailand finance minister: economy to recover next year with 4% growth

Updated 23 November 2020

Thailand finance minister: economy to recover next year with 4% growth

  • Economy had bottomed but recovery was not fast as the battered tourism sector hurt supply chains
  • Budget for the next fiscal year will still focus on boosting domestic activity

BANGKOK: Thailand’s economy is expected to grow 4 percent in 2021 after a slump this year and fiscal policy will support a tourism-reliant economy struggling from the impacts of the coronavirus pandemic, the finance minister said on Monday.
Southeast Asia’s second-largest economy shrank a less than expected 6.4 percent in the third quarter from a year earlier after falling 12.1 percent in the previous three months.
The economy had bottomed but recovery was not fast as the battered tourism sector, which accounts for about 12 percent of gross domestic product (GDP), has also hurt supply chains, Finance minister Arkhom Termpittayapaisith said.
“Without the COVID, our economy could have expanded 3 percent this year, he said. “As we expect a 6 percent contraction this year, there is the output gap of 9 percent,” he told a business forum.
“Next year, we expect 4 percent growth, which is still not 100 percent yet,” Arkhom said, adding it could take until 2022 to return to pre-pandemic levels.
There is still fiscal policy room to help growth from this year’s fiscal budget and some from rehabilitation spending, he said.
The budget for the next fiscal year will still focus on boosting domestic activity, Arkhom said, and the current public debt of 49 percent of GDP was manageable.
Of the government’s 1 trillion baht ($33 billion) borrowing plan, 400 billion would be for economic revival, of which about 120 billion-130 billion has been approved, Arkhom said.
He wants the Bank of Thailand to take more action short term on the baht, which continued to rise on Monday, despite central bank measures announced on Friday to rein in the currency strength.
“They have done that and they have their measures... which should be introduced gradually and more intensely,” Arkhom said.