An expected decline in oil prices and output will weaken the fiscal and external positions of Saudi Arabia and other member states of the Gulf Cooperation Council, resulting in faster-than-expected debt accumulation, Moody's said in a report.
The rating agency projected oil prices to average $62 per barrel in 2019 and 2020, down from an average of $71 per barrel in 2018.
"Moderate oil prices will weigh on GCC governments' fiscal metrics in 2019, particularly since most have adopted expansionary budgets, aimed at supporting growth in non-hydrocarbon output and accelerating job creation," wrote the report's authors, led by Moody's senior analyst Alexander Perjessy.
Fiscal deficits are expected to widen by 6.9% of GDP in Kuwait, 3.7% in Oman and 1.0% in Saudi Arabia, according to Moody's. Qatar and the United Arab Emirates, which were previously expected to post budget surpluses, are now forecast to record small fiscal deficits.
"The situation would be more stark were oil prices to fall further from our baseline scenario," the Moody's report said.
In addition to lower oil prices, oil production cuts by GCC nations will also put pressure on their external positions, Moody's said. For 2019, the rating agency lowered its current account surplus forecasts for the UAE, Kuwait, Qatar and Saudi Arabia.
Only Oman and Bahrain are expected to post current account deficits this year at 9.4% of GDP and approximately 5% of GDP, respectively, up from Moody's previous forecasts.