As the consequences of a sharp fall in oil prices, GCC sovereigns continue to face the emergence of unprecedented fiscal financing needs, S & P said in its 'Middle East and North Africa Sovereign Rating Trends Mid-Year 2016' report.

In Bahrain, Oman and Saudi Arabia, S & P expects fiscal deficits to average 12 per cent of GDP per year in 2016 and 2017.

"Given the uniformly high dependence among GCC sovereigns on receipts from hydrocarbon exports, the consequences of a sharp fall in prices are clearly visible in both fiscal and external data. While the resulting imbalances differ in scale and duration, one commonality among GCC sovereigns is the emergence of almost unprecedented fiscal financing needs."

It said creditworthiness in the region is at its lowest ebb since 2003, before hydrocarbon prices embarked on their decade-long climb.

S & P said the first half of 2016 saw an intensification of downgrade rating pressure in the region, with the downgrades of Saudi Arabia, Oman and Bahrain. The agency had lowered Oman's sovereign rating by two notches to BBB- from BBB+.

Aside from Bahrain, S & P said GCC sovereign debt issuance had been relatively sparse prior to 2016, particularly in foreign currency, and usually reserved for benchmarking or monetary policy purposes.

It said financing for the year is not yet complete for the GCC sovereigns. 'We believe the receptiveness of both international and domestic market is changing, which could present funding challenges.'

'International market volatility - reflecting weaker demand from China, uncertainty stemming from Brexit, and the potential for a change in stance from key monetary authorities on global liquidity--could deter issuers from Eurobond placements for some time,' S & P added.

Balance sheet strength, however, remains a characteristic of the region, with only Bahrain in a fiscal net debt position.

'That said, funding deficits with assets alone - if this were possible - would have a marked impact on this strength. Currently, we expect Bahrain's net debt position to increase almost six-fold between 2014 and 2019, Oman's net asset position to decline by almost 90 per cent and Saudi Arabia's by 35 per cent over the same period.'

Absent a substantial increase in the scale and speed of fiscal consolidation, or oil prices, S & P said it expects that regional financing needs will remain elevated for some time thereby weakening government balance sheets.

S & P estimates Oman's real GDP growth to be one per cent for 2016 and 2017 before picking up to 1.5 per cent in 2018. The ratings agency said its stable outlook on Oman reflects the balance between expectation that Oman will largely maintain fiscal and external stock positions over 2016-2019, against risks from weakening economic income, fiscal, and external flows.

'We could consider raising the ratings if the foundations of economic growth in Oman strengthened - raising per capita income levels - or if our forecasts for Oman's fiscal and external positions improved substantially compared with our current projections,' S & P said.