Persian Gulf economies on downward spiral
A major credit rating agency has downgraded the credit ratings for two Persian Gulf states, saying the plunging crude prices have taken their toll on the oil-dependent economies.
Moody's has lowered the credit ratings of Oman and Bahrain.
Bahrain's rating has been downgraded one notch to Ba1 or junk, a rating that has significant credit risk. Moody’s has also lowered Oman's rating two notches to A1 -- still an upper-medium grade with low credit risk.
According to the credit rating agency, oil and gas accounted for 75 percent of Bahrain's exports and 86 percent of public revenues between 2010 and 2014.
Also for Oman, Moody’s said, oil and gas account for 90 percent of government revenues.
Moody’s has also put other Persian Gulf oil exporters including OPEC kingpin Saudi Arabia, Kuwait, Qatar and United Arab Emirates on review for downgrade.
Back in February, Standard and Poor's lowered the economies two notches to A-.
The oil-rich countries have already taken unprecedented austerity measures including cutting energy subsidies, as part of efforts to counter the drop in oil revenues.
Moody's Investors Service has predicted that oil will be traded at average $33 a barrel in 2016, $38 a barrel in 2017 and $48 a barrel by 2019.
The credit rating agency has already announced that the turmoil in the oil market is weakening Gulf states' balance sheets, their economies as well as their credit profile.
The situation has been particularly grave for Saudi Arabia, which has already been involved a costly war in Yemen.
Back in February, Saudi Arabia’s Jadwa Investment reported that the monarchy’s fiscal reserves dropped to a four-year low last year as the kingdom was struggling to make up for an acute budget deficit caused by plunging oil revenues.
According to a report released fiscal reserves of the world's largest crude exporter fell to USD 611.9 billion at the end of 2015, which was the lowest figure recorded for the country since 2011.
The figure was down from USD 732 billion recorded a year before, said in an economic report.
Saudi Arabia posted a record high budget deficit of USD 98 billion in 2015 as plummeting oil prices negatively affected the kingdom’s revenues.
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