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Gulf keeps spending as price of oil rises
By Martin Dokoupil |
December 21, 2009, Monday
|
Print Edition
Print Edition
GULF Arab states are likely to keep their large spending packages in place next year as higher oil prices give the world's top oil exporting region enough room to support a fragile recovery.
The global financial crisis slashed income for top Arab economies - Saudi Arabia and the United Arab Emirates - making them drain reserves as they embarked on massive spending plans to help emerge from this year's downturn.
But with oil prices more than doubling from last December's lows of around US$32 a barrel, most Gulf governments expect to book budget and current account surpluses this year and are more upbeat about 2010.
"Governments around the globe have been running expansionary policies over the past year, but in much of the world high deficits and a rising debt stock means they are running out of room. In most of the Gulf, that's just not the case," said Simon Williams, chief economist at HSBC Bank in Dubai.
"The Gulf's fiscal stimulus may have arrived later than in other parts of the world but is likely to last longer."
The economies of Saudi Arabia and the UAE are still expected to shrink by around 1 percent this year as lending remains slow, but new inflows of oil money should help them expand by around 3 percent in 2010.
Spending is seen staying particularly high in Saudi Arabia. The world's top oil exporter has embarked on a US$400 billion five-year spree, and in Qatar with a multi-billion dollar expansion of its natural gas facilities.
The global financial crisis slashed income for top Arab economies - Saudi Arabia and the United Arab Emirates - making them drain reserves as they embarked on massive spending plans to help emerge from this year's downturn.
But with oil prices more than doubling from last December's lows of around US$32 a barrel, most Gulf governments expect to book budget and current account surpluses this year and are more upbeat about 2010.
"Governments around the globe have been running expansionary policies over the past year, but in much of the world high deficits and a rising debt stock means they are running out of room. In most of the Gulf, that's just not the case," said Simon Williams, chief economist at HSBC Bank in Dubai.
"The Gulf's fiscal stimulus may have arrived later than in other parts of the world but is likely to last longer."
The economies of Saudi Arabia and the UAE are still expected to shrink by around 1 percent this year as lending remains slow, but new inflows of oil money should help them expand by around 3 percent in 2010.
Spending is seen staying particularly high in Saudi Arabia. The world's top oil exporter has embarked on a US$400 billion five-year spree, and in Qatar with a multi-billion dollar expansion of its natural gas facilities.
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