Arab Today, arab today gulf braces for tough times over oil price plunge
Last Updated : GMT 13:42:01
Arab Today, arab today
Arab Today, arab today

Pumping about 17.5m barrels per day

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 sit with falcons near a Bedouin tent
Kuwait City - Arab Today

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."
Source: AFP

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 Kanye West puts hijab-wearing model

GMT 12:22 2017 Monday ,20 February

Kanye West puts hijab-wearing model
Arab Today, arab today Tourism shows signs of recovery

GMT 09:59 2017 Monday ,20 February

Tourism shows signs of recovery
Arab Today, arab today To release new antiques collection

GMT 20:33 2017 Friday ,17 February

To release new antiques collection
Arab Today, arab today Optimism on the front line

GMT 07:24 2017 Monday ,20 February

Optimism on the front line
Arab Today, arab today Murder of 2 reporters in Dominican Republic

GMT 22:45 2017 Thursday ,16 February

Murder of 2 reporters in Dominican Republic

GMT 10:06 2017 Friday ,17 February

South Korea's Hanjin Shipping declared bankrupt

GMT 09:26 2017 Friday ,17 February

Samsung's history tainted by run-ins with the law

GMT 09:20 2017 Friday ,17 February

Samsung heir arrested in corruption probe

GMT 10:26 2017 Thursday ,16 February

Dollar, equities stutter in Asia after Trump rally

GMT 08:45 2017 Thursday ,16 February

Hanjin saga reveals S.Korea corporate governance flaws

GMT 09:40 2017 Wednesday ,15 February

Heineken profits drained in 2016 by currency turmoil

GMT 09:10 2017 Tuesday ,14 February

Sharjah Chamber Eyes Strong Economic Ties with Belgium
View News in Arabic - Business: أخبار الأعمال
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Kidogo provides childcare for underserved

GMT 20:24 2017 Wednesday ,15 February

Kidogo provides childcare for underserved
Arab Today, arab today Tragic fluctuations of Bakhtiari's life revealed

GMT 06:50 2017 Wednesday ,15 February

Tragic fluctuations of Bakhtiari's life revealed
Arab Today, arab today London to tax old cars

GMT 14:06 2017 Friday ,17 February

London to tax old cars
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today Competes Sweden and Germans by S90

GMT 22:36 2017 Thursday ,16 February

Competes Sweden and Germans by S90
Arab Today, arab today Porsche reveals new 2018 Panamera

GMT 17:31 2017 Wednesday ,15 February

Porsche reveals new 2018 Panamera
Arab Today, arab today Egypt to hold first session of Arab film festival

GMT 21:11 2017 Saturday ,18 February

Egypt to hold first session of Arab film festival
Arab Today, arab today Teach monkeys to recognize themselves in mirror

GMT 20:41 2017 Wednesday ,15 February

Teach monkeys to recognize themselves in mirror

GMT 07:30 2017 Saturday ,18 February

Actress Nadeen Al Rassi views art as her entity

GMT 06:40 2017 Friday ,10 February

MP calls for removing text from Islamic story

GMT 16:08 2017 Wednesday ,15 February

Shawsh reveals her collection "Jewelry of dreams"

GMT 10:26 2017 Tuesday ,14 February

Emergency UN meeting in Harare

GMT 14:04 2017 Tuesday ,14 February

"Lagom" new Swedish concept in interior design

GMT 12:07 2017 Thursday ,16 February

Bite-mimicking malaria vaccine

GMT 19:16 2017 Friday ,17 February

Aziz House ready to host the tourists

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 12:39 2017 Monday ,20 February

newest smartphone another winner for Huawei

GMT 17:36 2017 Monday ,13 February

Designer prepares to present 2017 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