GCC fiscal balance to be affected by falling oil prices

22 Dec 2014

(MENAFN) According to a report by Standard Chartered, Gulf countries’ fiscal balances and growth are going to be impacted due to the drop in oil prices and the possible cuts in production in 2015 if the prices continue with their slide, Gulf Times reported

The report said that the Middle East and North Africa’s (MENA) economies will have to go through major economic reforms in case they want to ride out the drop in oil prices, which began in June and led prices to reach their five-year low.

Standard Chartered said also said the growth outlook for the major oil exporters in 2015 will be challenging for these countries, particularly the GCC countries, since their fiscal policies have been dependent on oil, but now these policies need to be tightened, which will also affect their non-hydrocarbon growth and their GDP growth as well.

“We see three important themes for the region in 2015. First, the growth dynamics of the major oil exporters will be adversely affected, while we see positive growth signals from some oil importers that have implemented reforms and are benefiting from investment inflows. Second, as recent oil-price moves have shown, fiscal spending that is heavily dependent on the hydrocarbon sector cannot rise indefinitely. Finally, reducing high energy subsidies in the Mena region may be crucial to giving economies the fiscal leeway needed to meet growing investment needs,” The report said.