DUBAI: Wealthy Gulf states are likely to see their oil and gas revenues drop next year but heavy government spending and increasingly energetic private sectors will keep economic growth robust, a Reuters poll showed Monday.
Global oil prices are expected to fall moderately in 2014, as new supply comes on line from the United States, Iraq and other countries. Futures markets indicate lower prices next year.
This will probably push down hydrocarbon export revenues throughout the Gulf. The poll of 15 analysts predicted that Saudi Arabia’s revenues would slip to a median $293.3 billion next year from $312.1 billion in 2013.
“The decline in the oil price will weigh on the external and fiscal surpluses in the region,” said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.
Nevertheless, with the exception of tiny Bahrain, state finances in the six countries of the Gulf Cooperation Council should remain healthy enough for governments to boost spending if necessary to support growth.
Saudi Arabia’s fiscal surplus is projected to fall from a median estimate of 8.1 percent of gross domestic product this year to a still-high 5.2 percent.
Meanwhile, consumer spending booms and government stimulation of the private sector mean Gulf economies can keep some of their momentum even if state-run oil sectors slow.
“Growth in the non-oil sector remains solid, with the improvement in private sector activity looking increasingly broad-based,” said Daniel Kaye, head of macroeconomic research at National Bank of Kuwait.
The result is that economic growth is unlikely to slow much, if at all. Saudi Arabia’s GDP is projected to grow 4.3 percent next year after an estimated 4.2 percent in 2013, say median forecasts.
GDP growth in the United Arab Emirates, the Arab world’s second largest economy, is projected slow only from 3.6 percent to 3.7 percent.
In Kuwait, where the government is moving ahead with long-delayed infrastructure projects, growth is forecast to accelerate to 2.9 percent next year from an estimated 2.5 percent in 2013.
At the same time, recent falls in global food prices have led analysts to reduce inflation forecasts for several Gulf countries compared to the last Reuters poll conducted in April.
Saudi Arabia is now projected to see 3.8 percent inflation this year and 3.9 percent in 2014, compared with the last poll’s median forecasts of 4.5 percent and 4.0 percent.
Qatar is among the most inflation-prone Gulf countries, as the country launches infrastructure projects for the 2022 football World Cup.
Qatari inflation is projected to rise to 4.0 percent next year from an estimated 3.5 percent in 2013.