GCC braces for $350bn loss on oil plunge
MANAMA, December 20, 2014
Gulf countries could lose at least half their oil revenues or around $350 billion a year as crude prices plunge, according to senior analysts.
The GCC states, which pump about 17.5 million barrels per day, are bracing for tough times after oil prices have dropped by half from their 2014 highs to around $60 a barrel.
Bahrain has lost $261.9 million over the past 45 days as the price of locally-produced crude dropped below $59.59 per barrel, our sister paper Akhbar Al Khaleej reported Bapco's official website as saying.
The two-year state budget had endorsed $90 as a forecast benchmark price.
Oil revenues make up around 90 per cent 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 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 a real diversified economy.
'Public spending has soared to new record highs and it was not for vital infrastructure projects,' Al Saadun said.
Economists are warning that even with the huge reserves many have built up, a prolonged drop in oil prices will hit Gulf states hard. Ratings agency Standard & Poor's says an extended decline in oil prices will likely slow their economies, reducing spending on infrastructure projects and hitting the private sector.
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.-TradeArabia News Service
