(MENAFN- Muscat Daily) Muscat- While GCC countries are well-positioned on average to withstand external payment pressures, Bahrain and Oman are more exposed due to their low levels of foreign exchange reserves and large current account deficits, according to Moody's Investors Service.
The ratings agency released a report titled 'Sovereigns – GCC: Currency Risks Still Low on Average, But Rising in Oman and Bahrain' on Wednesday.
'GCC countries have seen a substantial weakening in their current account balances as a result of the fall in oil prices since 2014,' said Mathias Angonin, a Moody's analyst and co-author of the report.
A current account surplus of close to 18 per cent of GDP on average across GCC countries over 2005-2014 has shifted to a deficit of 3.4 per cent in 2016, Moody's said. It said, in 2016, Oman had the highest current account deficit among GCC countries, which Moody's estimates at 20.1 per cent of GDP, and the highest external break-even oil price at US$78.4 per barrel. The ratings agency expects GCC aggregate current account deficit to narrow to US$5.5bn (0.3 per cent of GDP) by 2018 from US$21bn (3.4 per cent of GDP in 2016).
Moody's noted that the GCC authorities are unlikely to abandon US dollar pegs as they have bolstered macroeconomic stability and private sector confidence, lowered transaction costs, and helped to avoid the currency volatility experienced by most emerging economies.
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