Qatar is among the financially strong countries that is able to "afford more significant fiscal support" despite the slump in oil prices, Oxford Economics said in its research brief on GCC response to the Covid-19 crisis.
Oman and Qatar, it said have implemented programmes to support loans to business and liquidity in the banking sector, post coronavirus spread.
Although “budget deficits have soared” across the GCC as a result of low oil prices, most Gulf countries have significant financial assets upon which to draw, it noted.
As a result, concerns about fiscal consolidation can be delayed to 2021, Oxford Economics said.
The authorities across the GCC have all announced initial packages, but the majority were announced a few days ago and the situation relating to the coronavirus pandemic has moved rapidly even since then.
The size of the fiscal packages, Oxford Economics noted, are “small compared to the reductions in our GDP forecasts” caused by the coronavirus, and the measures proposed seem too narrow to provide support across the economies of the Gulf Cooperation Council.
“And we expect to lower our GDP forecasts in the GCC even further as the toll on economic growth in 2020 mounts – we assess that the non-oil sectors in most GCC countries are already in recession and we anticipate declines of 2% or more in non-oil GDP in 2020 as a whole. It seems likely that most GCC governments will need to introduce further packages in the coming weeks to both deepen and broaden support for their economies.
“Failure to do so could see businesses collapse, especially among SMEs, despite the measures taken so far to ease access to credit and lower costs. This will limit the speed at which the non-oil economy can be restarted,” Oxford Economics said.
The biggest support programme in the GCC comprises a package that reflects many of the features of packages implemented in Europe. Measures include paying the salaries of all private sector employees for three months from April from the unemployment fund and all water and utility bills will be paid for three months from April. The government is also exempting individuals and businesses from municipal and industrial land rental fees for three months, while tourism-related companies will be exempt from tourism levies, Oxford Economics noted.
GCC countries, it said, will need to increase support to businesses and households and increase the level of support they are providing to the non-oil economy – and that they can afford to do so despite the likelihood that oil prices will average only around $25 for a barrel for the rest of 2020, Oxford Economics said.