The GCC sovereigns' reliance on hydrocarbons will remain the key credit constraint despite ongoing diversification efforts, said Moody's Investors Service in a new report.

 "Economic diversification away from hydrocarbons remains the most frequently stated policy objective in the region but will likely take many years to achieve," said Alexander Perjessy, a VP-Senior Analyst at Moody's and the author of the report.

"The announced plans to boost hydrocarbon production capacity and government commitments to zero or very low taxes make it unlikely that heavy reliance on hydrocarbons will diminish significantly in the coming years."

Key points:

•    The 2020 pandemic-induced shock to oil demand and prices highlighted GCC sovereigns' very high exposure to oil market fluctuations.
•    For most GCC countries, oil and gas still account for at least 20% of GDP, more than 65% of total exports and at least 50% of government revenue.
•    Despite ambitious governments' plans, diversification efforts since 2014 have yielded only limited results and will be held back by lower oil prices.
•    Moody's expects the diversification momentum to pick up but to be held back by the reduced availability of resources to fund diversification projects in a lower oil price environment and by intra-GCC competition in a relatively narrow range of targeted sectors.
•    Hydrocarbons will continue to drive GCC sovereigns' fiscal strength, liquidity position and external vulnerability for many years. – TradeArabia News Service