Arab Today, arab today gulf braces for tough times over oil price plunge
Last Updated : GMT 15:31:47
Arab Today, arab today
Arab Today, arab today

Gulf braces for tough times over oil price plunge

Arab Today, arab today

Arab Today, arab today Gulf braces for tough times over oil price plunge

Emirati youths in traditional outfits
Kuwait City - AFP

 Gulf countries are bracing for tough times as vital oil revenues fall and after they missed a golden opportunity to diversify their economies in a decade of unprecedented windfalls, analysts say.
The six nations of the Gulf Cooperation Council (GCC) -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates -- could soon start reeling from falling oil prices, which have dropped by half from their 2014 highs to around $60 a barrel.
Pumping about 17.5 million barrels per day, GCC countries are forecast to lose at least half their oil revenues, or around $350 billion a year, at current price levels.
Oil revenues make up around 90 percent of income for most GCC states and with prices now below budget forecasts, their governments are looking at certain deficits next year.
Spending cuts are sure to follow -- and possibly even the region's first taxes -- raising fears of public discontent and eventually an economic slowdown.
The oil price drop has also sent Gulf stock prices plummeting, wiping out billions of dollars of market value across the region and hurting major private firms like developer Emaar Properties and builder Arabtec Holding.
The heart of the problem, leading Kuwaiti economist Jassem al-Saadun said, is that Gulf states failed to seize on surging energy revenues to build up their economies outside the oil sector.
"Gulf states have missed an important opportunity to reform and build a real diversified economy," Saadun said.
"Public spending has soared to new record highs and it was not for vital infrastructure projects to diversify the economy," Saadun said.
"It was mostly for wages, salaries and subsidies... and handouts for buying political loyalty especially after the Arab Spring."
- Reserves only 'temporary cushion' -
Economists are warning that even with the huge reserves many have built up, a prolonged drop in oil prices will hit Gulf states hard.
"The prevailing growth model for most oil-exporting countries has left them vulnerable to a sustained decline in oil prices," the International Monetary Fund said in a research bulletin last week headlined: "It is high time to diversify".
Ratings agency Standard & Poor's is warning that an extended decline in oil prices will likely slow the Gulf economies, reducing spending on their massive infrastructure projects and hitting the private sector.
S&P has lowered its outlooks for Saudi Arabia, Oman and Bahrain, though it has maintained their ratings because of their impressive reserves.
The IMF has said that -- barring Oman and Bahrain, which are already in deficit -- GCC states will not be greatly affected in the short-term as they can tap into reserves estimated at $2.5 trillion.
But these funds, the IMF warned, will "only provide a temporary cushion".
In some parts of the region, the belt-tightening has already begun.
Regional powerhouse Saudi Arabia has insisted it will maintain its high spending levels by tapping into reserves.
But Kuwait has ordered major spending cuts and is considering lifting petrol and electricity subsidies.
In the UAE, Dubai has announced plans to raise electricity and water charges. Similar measures are expected by other countries.
- 'Options are no longer easy' -
Moody's Ratings said Gulf countries are likely to start with cuts in spending on "non-strategic investment projects" but will eventually face tough choices.
"Slowing or even reversing the growth in current government spending, including subsidy reforms, will be more difficult as governments seek to meet social welfare demands," the agency said.
As oil revenues in Gulf states surged from about $100 billion in 2000 to $729 billion last year, public spending grew from about $150 billion to $547 billion, according to IMF figures.
But the spending focused mostly on items like wages and subsidies -- not crucial capital investment.
"Current expenditure has surpassed capital spending by miles," said M.R. Raghu, head of research at Kuwait Financial Center (MARKAZ).
Cutting that spending now is difficult as it means taking courageous decisions on wage and subsidy reforms, experts say.
The Gulf states have adopted a generous cradle-to-grave welfare system with highly subsidised services and fuel and no taxation.
The World Bank has urged GCC states to start immediate cuts to energy subsidies, which cost them more than $160 billion annually, and Saadun said it was "inevitable" they would have to start introducing taxes.
Such moves would prove deeply unpopular. But Saadun said putting them off would eventually make more drastic efforts necessary, which could spark the kind of social unrest that has hit other countries in the region.
"Yes, these measures are politically sensitive, but the alternative is an Arab Spring in the Gulf. Options are no longer easy."

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today gulf braces for tough times over oil price plunge Arab Today, arab today gulf braces for tough times over oil price plunge

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today gulf braces for tough times over oil price plunge Arab Today, arab today gulf braces for tough times over oil price plunge

 



Arab Today, arab today
Arab Today, arab today Youssra depended on colored foam

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today Sheraton Grand Hotel reveals its deals

GMT 12:20 2017 Monday ,25 September

Sheraton Grand Hotel reveals its deals
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today Iraq Kurds in historic independence vote

GMT 15:20 2017 Monday ,25 September

Iraq Kurds in historic independence vote
Arab Today, arab today North Korea 'more opaque'

GMT 10:50 2017 Sunday ,24 September

North Korea 'more opaque'
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Ministry seeks to improve education

GMT 14:49 2017 Sunday ,17 September

Ministry seeks to improve education
Arab Today, arab today 'Lady Beast' fights for girl gamers

GMT 10:27 2017 Sunday ,24 September

'Lady Beast' fights for girl gamers
Arab Today, arab today Conditions growing dire    

GMT 09:22 2017 Monday ,25 September

Conditions growing dire    
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Third generation adds more power

GMT 13:40 2017 Sunday ,24 September

Third generation adds more power
Arab Today, arab today Carmakers face billions in European

GMT 12:37 2017 Saturday ,23 September

Carmakers face billions in European
Arab Today, arab today Lebleba is preoccupied in filming 'Back Street'

GMT 08:56 2017 Thursday ,21 September

Lebleba is preoccupied in filming 'Back Street'
Arab Today, arab today Psychologists help Mexico deal

GMT 05:05 2017 Sunday ,24 September

Psychologists help Mexico deal

GMT 08:59 2017 Wednesday ,20 September

Youssra prepares for launching her program

GMT 10:16 2017 Friday ,22 September

All eyes on May as she prepares

GMT 16:53 2017 Saturday ,02 September

Mai importance of gifts during Eid Al-Adha

GMT 20:10 2017 Saturday ,23 September

Big Western brands polluting oceans

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 18:11 2017 Saturday ,23 September

Doctor provides advices to families

GMT 11:11 2017 Sunday ,24 September

The dark side of new tourism hope

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 12:46 2017 Thursday ,21 September

Google likely to buy stake in Taiwan smartphone maker HTC

GMT 11:37 2017 Saturday ,12 August

Fashion designer reveals her new collection
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday