Mubasher: Moody's Investors Service explained the factors which led to the negative outlook for sovereign creditworthiness in the Gulf area for the year 2020.
A recent report by Moody’s showed that the slowdown in the development of fiscal reforms at a time of reasonable oil prices contributed to the outlook, along with weak growth and higher geopolitical risk.
Further gradual erosion in GCC credit metrics is expected by Moody’s which relied in their outlook on the moderate oil prices over the medium-term.
Moody's vice president - senior analyst, Alexander Perjessy, highlighted: "The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms.”
Perjessy added, "This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue."
Growth in the non-oil sector will be constrained by lower oil revenue available to fund government spending; this will discourage governments from undertaking additional fiscal tightening.
Moody’s noted that “the region's geopolitical risk is higher and broader in nature than in the past amid ongoing tensions between the US and Iran.”
