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Gulf: No austerity despite falling oil prices
BAGHDAD / Obelisk: Analysts are expected to be a sharp decline in oil prices, which reached 55 percent since June last, ushered in an era of austerity in the Gulf region next to a sharp drop in income. But austerity has not happened does not have any signs of looming economic defenses set up by the Gulf states in the wake of the global financial crisis five years ago to deal with such a fall in oil prices has withstood.
Consumers continue to spend money, and companies are still investing and governments announce a record budget for 2015. Some economists expect to accelerate the pace of growth in the current year, the GCC countries. It is likely to slow to work in a number of construction projects or stops, particularly in Bahrain and Oman, the smaller of two states between the six countries and most vulnerable in economic terms.
If oil prices remain at current levels for years may have an economy larger countries in the Gulf to make painful reductions in spending.
However, things will go in the foreseeable future in the usual course of unchanged in Saudi Arabia, UAE, Qatar and Kuwait, which have formed a huge financial reserves that can depend upon in government spending to continue at high rates. This contributes to maintaining high morale among shareholders and companies despite the decline in oil.
Fsharkp «Jarir Marketing» largest listed company in the retail sector in the Saudi stock market, has announced an increase of 20 percent in annual sales in the last quarter of last year. The polls showed the views of PMI first for Canon (December) in Saudi Arabia and the United Arab Emirates that the activity of non-oil sectors to grow at the same pace, which grew in June.
Said Chief Executive Officer «Majid Al Futtaim Group Holding», Iyad Malas «the business community in the region is not sure of the direction of oil prices, but he expects strong growth this year.» He said in an interview with the agency «Reuters»: «launched major projects in infrastructure and government spending constant ... We do not expect a slowdown in retail sales this year in Saudi Arabia or in the region». He stressed that the group does not see a reason to change their investment plans.
Is the cost of the decline in oil for the countries of the Gulf huge, estimated expert in «Capital Economics company» in London, Jason died, if the average blend «Brent» prices this year reached $ 60 a barrel Vstsgel Cooperation Council (GCC) joint deficit in the balance of current transactions of $ 60 billion . If the average price reached $ 110 a barrel as it was in June it will achieve a surplus of $ 300 billion.
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However, the composition of the oil industry in the Gulf shrinking direct effect of changes in oil prices on the economy. Vaaradat export of oil does not flow directly to the private sector, but governments, which decides what it spends them, which means that the main factor that governs the economy is not the price of oil, but the state policy in the budget situation.
Government data indicated the past two weeks to spend that states may decline marginally in real terms this year, but will remain high and near record highs.
And Saudi Arabia plans to increase nominal spending rose 0.6 percent on the target for 2014. Spending Dubai announced increased spending nine percent, the Sultanate of Oman is also planning to increase 4.5 percent.
Officials in other governments in the GCC, including Abu Dhabi, Qatar, Kuwait, and said it will not cut spending on economic development.
It uses some of the governments of falling oil prices political cover to raise taxes or cut subsidies but it did not amount to austerity. Kuwait has reduced support for diesel fuel but has ruled out compromising with the support of gasoline.
And lifted the Abu Dhabi utility charges. Therefore unlikely to fall much growth, perhaps even accelerating whether other factors affecting the positive. For example, began to fade the initial negative effects of the Saudi labor market reforms that aim to pay more Saudi citizens to accept jobs through tighter restrictions on the employment of foreigners.
It is certain that the governments of the GCC will not be able to avoid significant reductions in spending if oil prices remain low. If «Brent» remained at its current level near $ 50 a barrel, all countries will see probably a deficit in the budget. However, the financial reserves to enable them to carry the deficit for years.
It is estimated «Bank VTB Capital» investment that if oil prices remain at $ 60 a barrel, the balances of the four major states of the Gulf Cooperation can public spending at current rates financing for a period ranging from two to five years, or cover the deficit in the budget for a period of four years, the Board of to 14 years, without resorting to borrowing to maintain the link with the GCC currencies to the dollar.
So far it seems that professional investors have similar confidence, stock prices have fallen in regional bourses, which are dominated by individual investors, but many fund managers see it as amounts in value. Bond prices and futures markets did not move in the currency as much as mentions shows that investors do not expect the financial pressures in the region.
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