Mubasher: The Gulf countries announced the largest ever budgeted spending which is expected for 2018 despite the current oil prices, Ubhar Capital said in a recent report.
The GCC governments have shifted their strategy to expansionary budgets after exercising austerity policy in the last couple of years.
Excluding Bahrain, the Gulf states announced that the overall budgeted spending of the GCC stands at $430 billion for 2018 compared to $411 billion in 2017, an annual growth of 7%.
“Revenue budgeted stands at $345 billion versus $311 billion in 2017, up by 11%. Growth in revenue has been large because of higher oil price estimated this year compared to 2017. In 2018, oil price assumed by most of the countries stand at $50/bbl. Only Qatar has assumed an oil price of $45/bbl while UAE did not announce budgeted oil price for its federal budget,” Ubhar Capital added.
Despite expansionary budgets, the GCC deficit is expected to drop by 6.6% to $84 billion.
Ubhar Capital noted that the GCC states’ deficit to nominal GDP is expected to decline to 5.6% in 2018 compared to 6.4% in 2017.
The Gulf governments forecast increased budgets for 2018 in sectors, including, health care, education, and infrastructure, and have also budgeted to go on a large scale infrastructure and construction spending.
Ubhar Capital added that “Governments have also tried to strike a balance between the need for higher expenditure and reducing budget deficits, which had been rare over the previous decade when oil was above the $100/bbl.”
GCC has budgeted $143 billion for the above sectors in 2018; Saudi Arabia allocated the highest amount of $91 billion. In terms of composition, UAE has allocated the highest at 51% from its total budget while Qatar allocation reaches 20.5%.
In light of growing oil prices, governments also took into account increasing provisions to low income segments and budgeted a hike in government subsidies and grants.
Subsidies across the GCC were mainly focused on fuel, electricity, and water.
“As per the disclosures announced, Subsidies in Kuwait have been budgeted to be highest at $11.2 billion in 2018 compared to $4.5 billion in Saudi Arabia and $1.9 billion in Oman. The same last year in Kuwait, Saudi Arabia and Oman stood at $10.2 billion, $2.7 billion and $1 billion, respectively,” Ubhar Capital said.
