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GCC may cut government spending programmes

MANAMA, January 14, 2015

Gulf states, which pump a quarter of the world's daily oil supply, may see record government spending programmes curtailed in this year's budgets.

This is due to a more than 50 per cent decline in crude prices which may make it harder for countries to tackle critical issues such as youth unemployment and infrastructure investments, said a report in the Gulf Daily News (GDN), our sister publication.

The International Monetary Fund (IMF) has stated that if low oil prices persist and current fiscal policies continue unchanged, some Gulf oil exporting nations' fiscal surpluses may turn into deficits as early as this year.

In 2013, Saudi Arabia's budget break-even oil price rose to $89 a barrel from $78 a barrel in 2012, according to the IMF.

Saudi Finance Minister Ibrahim Alassaf said in December that for the year, his ministry had assumed an average oil price close to levels of around $60 a barrel in its latest budget.

"The Gulf states have seen their oil revenue decline by about $1 billion a day over the last six months and if that sustains through the year then we could see as much as $400bn sucked out of the regional economy," said Gulf Intelligence managing partner Sean Evers.

"The lower-cost Opec producers are hoping that the pain of declining prices will knock out higher-cost producers, including Canadian oil sands developers and shale producers in the US, sooner rather than later if prices remain at levels below $70 a barrel," he said.

Upheaval in global oil markets and the wider implications on Middle East economies were key topics at the sixth edition of the Gulf Intelligence UAE Energy Forum in Abu Dhabi yesterday.

Former Lebanese prime minister Fouad Siniora gave a keynote speech on the latest socioeconomic outlook for the region, which is faced already with one of the highest youth unemployment rates in the world at about 26pc, four years after the onset of the 'Arab Spring'.

The forum was hosted for the second time under the patronage of UAE Energy Minister Suhail Al Mazrouei who provided his annual vision for the year ahead.

Other international guest speakers included International Energy Forum secretary general Aldo Flores-Quiroga, former UK secretary of state for energy Lord David Howell of Guildford, China's National Energy Administration international adviser Xiaojie Xu and World Energy Policy Summit president Narendra Taneja.




Tags: Gulf | government | Spending |

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