Gulf government debt to see record $100 billion surge in 2020 - S&P Global

By Marc Jones

LONDON (Reuters) - The Gulf region is set to see a record $100 billion (79.1 billion pounds) jump in debt this year as a result of the slump in oil prices and the economic repercussions of the COVID-19 pandemic, rating agency S&P Global estimated on Monday.

S&P, which has already downgraded a number Gulf countries' credit ratings this year, said the sovereigns' central government deficits were expected to reach about $490 billion cumulatively between 2020 and 2023.

"We expect total GCC (Gulf Cooperation Council) government debt to increase by a record-high of about $100 billion in 2020 alone, with an additional $80 billion run-down in government assets to finance an aggregate GCC central government deficit of about $180 billion."

"Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023," it added.

Saudi Arabia's deficit makes up the majority of the GCC fiscal deficit in nominal terms at about half of this year's and the next few years' $180 bln and $490 bln respective totals.

As a percentage of GDP, however, Kuwait has the highest 2020 central government deficit-to-GDP ratio of 39%, followed by Oman at 17%, Saudi Arabia at 15%, Abu Dhabi at 13%, Bahrain at 12% and Qatar at 10%.

S&P said it expected Gulf fiscal deficits to begin shrinking again from 2021, assuming that oil prices rise and production cuts are gradually tapered.

Debt issuance is seen meeting about 60% of the $490 billion financing requirement in 2020-2023 with the rest covered by asset drawdown. After this year's expected surge to $100 billion, total annual debt issuance is expected to drift down toward $70 billion by 2023.

(Reporting by Marc Jones, editing by Karin Strohecker and Andrew Heavens)