Cairo (Anadolu)—Credit rating agency Moody’s said on Monday that Bahrain and Oman were the Gulf countries most affected by falling oil prices in 2015, because both had high fiscal oil break-even prices and the lowest cash reserves in the region.
In a report obtained by Anadolu Agency, Moody’s said Kuwait and Qatar were the most resilient to lower oil prices because of their lower budget break-even prices per barrel and large financial reserves.
The break-even price is the average oil price per barrel that balances budget revenue and expenditure.
Oil prices have fallen sharply since the middle of the year. Brent crude dropped from $115 a barrel in mid-June to $67.73 on Monday, according to data reviewed by Anadolu Agency.
Moody’s said Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates had the capacity to weather a crisis caused by falling oil prices. Saudi Arabia and the UAE have large non-oil economies as well as substantial financial reserves.
The report said sovereign wealth funds in Kuwait, the UAE, Qatar, and Saudi Arabia could cover government spending for years, but Bahrain and Oman did not have comparable funds available.
World Bank data for 2013 show that the six Gulf countries held foreign exchange reserves worth $904.1 billion. Saudi Arabia alone accounted for the largest share, at $737.7 billion, equivalent to 81.5 percent of total Gulf foreign currency reserves.
Moody’s expected Saudi Arabia to record a budget deficit by 2015 and deficits in Bahrain and Oman to widen beyond 7 percent of gross domestic product.
It said every Gulf country except Oman was expected to run a current account surplus the following year.
The report also said government adjustments to lower oil prices would vary by country and include changes to spending on non-strategic investments. Slowing or reversing growth in current government spending, including subsidy reforms, would be more difficult as governments sought to meet their populations’ welfare needs.
The agency said Gulf countries might take steps to increase revenue by adjusting existing taxes, customs duties, and other non-oil revenue sources. Introducing new taxes would be a last resort.
According to Moody’s, Bahrain and Oman would probably finance any increase in their fiscal deficits the following year by issuing sovereign bonds. Saudi Arabia had announced that it would use reserves to finance any deficit. Moody’s did not expect debt levels in Kuwait and Qatar to rise.
Official figures showed that Saudi Arabia had transferred 50 billion riyals ($13.3 billion) from the state’s general reserve to the current account of the Saudi Arabian Monetary Agency, the central bank, to be used if government oil revenue declined.
Gulf countries hold a major share of global oil markets. Four of them—Saudi Arabia, the UAE, Kuwait, and Qatar—produce around 16 million barrels a day, more than half of OPEC’s 30.5 million barrels a day, and export about 13 million barrels a day.