Rating agency Moody’s Investors Service strongly believes that the decline in oil prices would hasten financial reform in the Gulf Cooperation Council countries.
The rating agency argues that the removal of subsidies on fuel prices are among the financial reform options available for the GCC region to cope with the repercussions of the low prices, reports Qatar-based Al Sharq.
Moody’s forecasts that the GCC states will register a combined deficit in their budgets equivalent to roughly ten per cent of GDP in 2015/2016.
The agency has also cut its forecast for crude prices, as it expects the average price per barrel for this year to reach $55 instead of the $65 previously forecast.
Steffen Dyck, an analyst at Moody’s, says: “We expect that the impact of lower hydrocarbon revenues on GCC public finances will spur policy adjustments in 2016. These could include reductions in subsidy spending and measures to broaden the non-oil revenue base.”
It is worth mentioning that oil prices have fallen by almost 60 per cent since June 2014, due to the abundance of global supply and weak demand.
($1 = AED 3.67, at the time of publishing)