Financial deficit in countries of the Gulf Cooperation Council (GCC) is expected to reach $51 billion in 2018, dropping 52 percent compared to 2017 budgets ($107 billion), according to an analysis by KAMCO Investment Company based on estimates of government budget issued by the International Monetary Fund (IMF).
Initiatives to enhance and control expenses are basic factors in reducing the deficit gaps in the budget. The budget deficit is expected to drop amidst forecasts that the revenues rise in case oil prices maintain stability until the end of the year and remain at the same levels of Q1 2018 (above $60 per barrel).
Current accounts credits of GCC countries are also expected to achieve a surplus in the time extending from 2017 till 2019, even if marginal (an estimate of 0.3 percent of GDP for that period).
Directive initiatives are expected to continue in order to reinforce non-oil economy in the GCC countries, but they will be less concurrent compared to previous years as GCC countries will likely use financial instruments to support their financial resources. An example is the introduction of VAT in UAE and Saudi Arabia. However, other Gulf countries didn’t implement it despite the IMF estimating that the VAT will offer additional revenues ranging from 1.5 percent to 3 percent of the oil GDP in the region.
Some independent procedures taken by some Gulf countries to generate revenues include: implementing the selective tax by UAE and Saudi Arabia in 2017, and the Saudi intention to raise fees for government services and taxes on vacant lands. Other states are preparing to introduce tax reforms on firms’ profits.
