Saudi Arabia to report modest budget deficit in 2018: Fitch

The windfall from oil prices recovery will test the durability of fiscal improvements carried by Gulf countries, Fitch Ratings said in a report on Thursday.

Most Gulf countries saw significant improvements in their fiscal and external balances, driven by a higher average oil price, but that has been offset by additional spending, the report said.

Saudi Arabia is expected to post a modest deficit, while Kuwait and Abu Dhabi are set to return to fiscal surpluses this year.

“In Saudi Arabia, new non-oil revenue measures have been offset by additional spending,” the report said.

Meanwhile, Bahrain and Oman will continue to report mid-single-digit deficits, keeping their balance sheets under pressure.

Fiscal and external deterioration, along with geopolitics, is a risk factor for all GCC sovereign ratings, Fitch said.

“Relative vulnerability to oil prices is a factor of original starting points, policy responses, and the extent to which these factors have already been reflected in rating actions,” it added.