The pandemic-related shock will cause the first deterioration in the budget balance in four years, according to Fitch Ratings‘forecasts.
While the government’s target is a deficit of 3% of GDP this year, it will rise to 4.7% of GDP, compared to 3.9% in 2019, the ratings agency estimates.
Measures taken by the government to combat the epidemic and provide economic relief will cost around 2% of GDP under Fitch estimates and the economic downturn will take a toll on tax revenues.
However, this will be partly offset by savings on the energy subsidy bill given the slump in hydrocarbons prices, an increase in regulated tobacco prices and spending reallocation.
“We expect the government to adjust investment spending to actual revenue collections to keep the deficit contained,” concluded Fitch Ratings.