Bahrain’s budget ‘will approach balance if oil averages $85

Bahrain’s budget ‘will approach balance if oil averages $85

MANAMA: Bahrain’s budget is seen nearing balance if oil prices continue to average $85 a barrel next year, says Fitch Ratings. Commenting on the resurgence in oil prices, the US-based ratings agency said yesterday that this would lead to a marked improvement in GCC fiscal and external balances in 2021, alongside reform momentum that has taken hold to varying degrees since 2014 in response to oil price volatility. Fitch’s scenario analysis estimates that GCC budgets, except in Bahrain, would move into surplus if oil prices were to average $75 a barrel in 2022. At the current price of $85/bbl, Bahrain’s budget would also be close to balance. In a stress scenario of $45/bbl on average in 2022, fiscal balances would be in deficit across the region. This would create the most pressure for Bahrain and then Oman. Fitch estimates that at $65/bbl, gross domestic and foreign issuance in GCC sovereigns would be half of what it would be with oil prices at $45/bbl. A gradual reconfiguration of fiscal policy in the GCC started with the oil price slide in late 2014. The firm expects further fiscal reforms, especially in the lower-rated GCC sovereigns, given uncertainty over the outlook for oil