Oman's fiscal break-even oil price second highest in the GCC: Moody's
Bahrain, Saudi Arabia and Oman, the three countries with the lowest GDP per capita in the GCC saw their fiscal break-even oil prices rise
Moody's Investors Service has said that Oman's fiscal break-even oil price - the price of oil at which the country's fiscal account is balanced - is the second highest in the GCC after Bahrain and is on an upward trend.
The ratings agency said that Oman's public expenditure increase has already outpaced new revenue, and its fiscal break-even oil price is estimated to be closer to US$100 per barrel (bpd) in 2014, the second highest in the GCC after Bahrain, which faces a much higher fiscal break-even oil price.
“In the GCC, the outlook for 2014 points to diminishing fiscal space, with actual and fiscal break-even oil prices converging. As a result, and in order to avoid deteriorating fiscal balances, the GCC governments will have to start tightening their fiscal stance, particularly countries like Bahrain and Oman that face higher fiscal break-even oil prices,” Moody's said in its MENA sovereign outlook report.
The ratings agency said that in the past three years, the high oil prices have been accompanied by large increases in fiscal spending in the GCC countries, although they were more than offset by additional revenue. “Between 2010 and 2013, we estimate that government expenditures increased more than 70 per cent in Oman and Qatar, and about 40 per cent in Bahrain and Saudi Arabia.”
For 2014, Moody's expects expenditure growth to slow in the GCC, and fiscal break-evens oil prices will continue to converge with actual prices. “Apart from Bahrain, we do not expect the GCC countries' fiscal accounts to be in deficit; nevertheless, should it occur, governments would likely use their reserve buffers and prioritise current over capital spending.”
“Bahrain, Saudi Arabia and Oman, the three countries with the lowest GDP per capita in the GCC saw their fiscal break-even oil prices rise by more than US$50bpd, and a lot more for Bahrain, between 2003 and 2014, while Kuwait, Qatar and the UAE had more moderate increases, around US$35 for all three countries,” Moody's said.
It said that real GDP growth will remain firm overall in the GCC in 2014, largely supported by vibrant non-oil sectors. Moody's expects Oman's fiscal surplus to decline in 2014.
- Additional oil output, lower oil price, different break-even points
- Structural weakness or bad luck? Oman, Bahrain will be pinched the hardest by lower oil prices
- Nothings lasts forever: Bahrain, Oman most vulnerable to impending drop in oil prices
- Qatar's public debt second highest in GCC
- Crashing oil: has the time come for GCC countries to tax their citizens?