With the rise in crude prices globally, the GCC economies are expected to turn positive their fiscal balance after seven years in 2022 at 7.3% of GDP followed by 6.0% of GDP in 2023, Kamco Invest said in a report. The last time the GCC experienced a positive aggregate fiscal balance was in 2014, the year that saw the decline in oil prices, at 3.1% of GDP.
Kuwait is expected to post the biggest fiscal surplus in the GCC this year at 14.1% of GDP followed by 12.5% of GDP for Qatar. The Sultanate of Oman, Saudi Arabia and the UAE are expected to post mid-single digit surpluses ranging from 5.5% to 7.7% of GDP in 2022 while Bahrain is expected to remain in the red with a fiscal deficit of 4.7% of GDP in 2022. The divergence is expected to continue in 2023 with Bahrain once again expected to post a higher fiscal deficit of 6.0% of GDP, while on the other hand, Qatar is expected to lead next year with a fiscal surplus of 16.0% of GDP followed by Kuwait at 14.1% and UAE at 4.9%.
Meanwhile, the International Monetary Fund estimates that the GCC countries are expected to see a significantly higher savings rate and may save about a third of their oil revenues. This is reflected in the average current account surplus for the GCC which is estimated to be in double digits in 2022 and 2023 at 16.7% and 13.7% of the GDP, respectively.
In a World Bank report, the GCC economies are projected to expand by 6.9% in 2022 before moderating to 3.7% and 2.4% in 2023 and 2024.
The increase in oil revenues this year versus last year has given a big boost to the GCC governments on the fiscal front. The relatively higher revenues versus continued spending by GCC governments has resulted in a decline in fiscal breakeven oil prices in all the GCC countries, except the UAE, for 2022. On the spending side, however, the projects market in the GCC has remained muted over the last few quarters with a steep decline in quarterly contract awards seen during Q3-2022 led by mounting global economic challenges and fears of an impending recession. The total value of contracts awarded in the GCC during 9M-2022 declined by 26.2% to $53.0 billion, down from $71.7 billion during the same period last year.
At the country level, except Kuwait and Bahrain, the breakeven oil prices for 2022 witnessed a downward revision for the rest of the GCC countries in IMF’s latest report versus their projections in April-2022. Moreover, with current oil prices of around $95 per barrel, only Bahrain has a 2022 breakeven oil price above the current oil price at $127.6 per barrel. Qatar continues to boast the lowest breakeven oil price this year at $48.1 per barrel followed by Kuwait and UAE at $56.7 per barrel and $63.9 per barrel, respectively. Comparatively, the average price of Brent spot crude stood at $ 104.1 per barrel during YTD-2022.