Abu Dhabi’s economy will contract 7.5 percent this year, S&P Global Ratings said, while Bahrain’s economy will shrink 5 percent this year because of low oil prices.
Bahrain’s fiscal deficit is seen widening to 12 percent of GDP this year from 4.6 percent in 2019, largely due to lower oil prices.
It also expected the fiscal deficit in the emirate to rise around 12 percent this year from 0.3 percent in 2019. The smallest emirates in the UAE are expected to receive exceptional financial support from the state.
The sharp drop in oil prices impacted the economy in the Gulf, especially in Bahrain, which relies heavily on oil revenues.
Bahrain is taking measures to be less dependent on oil and encourage local and foreign investment in real-estate and tourism.
Oil and natural gas remain the sole key natural resources in Bahrain, providing around 60 percent of the state’s revenues. Bahrain benefitted from the flourishing oil sector since 2001 to achieve economic growth.
It has attracted investments from the Gulf countries to contribute to development of the infrastructure and projects that would improve livelihoods, housing, health, education, roads, water, and electricity.
The data released by the Statistics Centre of Abu Dhabi showed a decline in the oil sector contribution to the GDP by 1 percent during last year, reaching 39.8 percent compared to 40.8 percent in 2018. This comes along with economic diversification plans endorsed by the emirate.
