The Gulf Corporation Council with six nations including Bahrain, Kuwait, Qatar, Oman, the United Arab Emirates and Saudi Arabia depend upon oil for close to 90% of the country’s revenues.
The impact is expected to lower the revenue from hydrocarbon on public finances in the GCC which will spur on adjustments in policy for 2016, said an analysts with Moody’s.
The UAE has taken the lead by liberalizing its fuel prices. Kuwait lifted its subsidies on kerosene and diesel and other states have planned subsidy cuts.
Oil prices have dropped by close to 60% since June of 2014 because of oversupply and a weaker global demand.
Due to that, the GCC member states will likely lose more than $300 billion in revenues from oil said an official from the International Monetary Fund.
The drop in the price of oil has caused the gross domestic product for aggregate nominal hydrocarbon to drop by more than 11% between 2012 and 2014.
The combined current surplus slipped to 14% of the overall GDP from close to 25% during that same two year period.
The fiscal deficit for the combined GCC region is expected to be nearly 10% of regional GDP for 2015 and 2016, in comparison to an average surplus of close to 9% between 2010 and 2014.
That would mean a deficit of more than $140 billion in 2015. Moody’s believes the states of the GCC will borrow to cover any shortfalls in the budget.
Overall, the government borrowing needs from GCC will likely averages close to 12.5% of the overall regional GDP or equal to about $180 billion annually between 2015 and 2016.
Both Qatar and Saudi Arabia issued bonds already.
Some states in the GCC, for the most part Saudi Arabia, have begun to withdraw from its foreign reserves that are estimated to be $2.7 trillion.