Oil at $70 is no quick fix for Gulf economies

DUBAI - 23 January 2018: Rising oil prices are easing fears of a financial crisis in the Gulf, but they look unlikely to trigger another economic boom in the region, a quarterly Reuters poll of private economists shows.

The Brent oil price has surged to three-year highs around $70 a barrel, from around $55 three months ago. That means a boost to oil export receipts for governments of the six-nation Gulf Cooperation Council.

Every $1 rise in the average price of oil this year would tend to improve Saudi Arabia’s budget position by roughly $2.1 billion, London’s Capital Economics estimated. Last month, Riyadh projected a 2018 deficit of $52 billion; analysts said the budget appeared to assume an oil price of roughly $55.

At current oil prices, three countries - the United Arab Emirates, Kuwait and Qatar - are probably heading for budget surpluses this year, analysts say.

Financial markets are reassured. The cost of insuring Saudi debt against default is near 30-month lows, while Oman sold a $6.5 billion bond this month - its largest ever - even though Standard & Poor’s rates its debt as junk.

The Reuters poll of 20 economists shows they don’t think the GCC’s outlook has been transformed, however.

Their median forecast for gross domestic product growth for four countries in 2018 - Saudi Arabia, the UAE, Oman and Bahrain - has been raised from the last poll, but only slightly. Saudi Arabia is now expected to grow 1.5 percent instead of the 1.3 percent predicted in October. Forecasts for Kuwait and Qatar are lower.