Mubasher: The past month has brought further evidence that non-oil sectors in the Gulf are suffering as low oil prices have started to hit home, said a recent report published by Capital Economics.
The picture is most stark in Saudi Arabia, where official data showed that the non-oil economy contracted by 0.7% y-o-y in Q1 - 2016.Capital Economics' GDP Tracker suggests that things have worsened since then, with the construction sector faring particularly poorly amid government spending cuts.
Similarly, Qatar’s non-oil economy seems to have slowed sharply. In Bahrain and Oman, non-oil growth is at multi-year lows. With oil prices likely to stay low and fiscal consolidation set to continue for many years to come, a marked turnaround is unlikely anytime soon.
Saudi Arabia’s economy grew by 1.5% y-o-y in Q1, but Capital Economics' GDP Tracker suggests that output contracted by around 2% y-o-y as of May. Meanwhile, comments by Oil Minister Khalid al-Falih have reignited speculation that OPEC and other large oil producers may reopen negotiations over an agreement to freeze oil output. But there are a number of reasons, including ongoing tensions between Saudi Arabia and Iran, to think that a deal is unlikely.
The UAE’s economy appears to have found its feet again in recent months, stated the report.
The latest data from Qatar suggests that its economy is coming off the boil.
Moreover, recently-released GDP data showed that the Kuwaiti and Omani economies held up well last year, despite the backdrop of lower oil prices. Bahrain recorded strong growth in the first quarter of 2016 due to a rapid expansion in the oil sector.
The headlines in Egypt have been dominated by the news that the government has reached a staff-level agreement with the IMF for a $12 billion financing package. The news has been welcomed by the financial markets and, if approved by the Fund’s board, the deal should go a long way to plugging the gaps in the country’s balance of payments position.
