Economic crisis hits wealthy Gulf countries

(Patria) - 6 member countries of the Gulf Cooperation Council (GCC) are facing the most severe economic crisis in history caused by falling oil prices and the coronavirus pandemic, according to the Institute of International Finance (IIF).

The GDP of these developed and wealthy countries will experience a contraction of 4.4% this year, despite indications that the virus has been successfully suppressed and the subsequent easing of measures in recent weeks.

Cuts in public spending adopted by regional authorities in an effort to halt the deficit's growth could only increase losses caused by reduced oil exports.

The deficit is estimated to increase from last year's 2.5% to 10.3% of GDP.

The Saudi Arabian Monetary Authority announced on Monday that it would inject an additional $13.3 billion into the local banking system to enable banks to support the private sector, following a significant drop in purchasing power in April due to epidemiological measures.

The IIF believes that the regional banking system remains solid with strong liquidity and capitalization.

Saudi Arabia, the region's largest economy, will likely face a GDP reduction of 4% and a deficit increase of 13%.

Oman, significantly weakened by rising debt, could face an economic contraction of 5.3% and a deficit increase to 16.1% compared to 9.4% in 2019, according to the IIF report.