The Gulf nations are spending like never before. The combined value of projects being planned, or already underway, in the Gulf region is nearing $2.46 trillion, more than 150% of the combined Gulf Co-operation Council (GCC) gross domestic product, according to Meed data.
Policymakers and experts, undoubtedly, are worried about the impact of such mammoth spending projections on GCC budget surpluses as well as growth outlook, Gulf Times reported.
Kuwait’s central bank governor Mohamed al-Hashel, in a rare public comment on policy issues, said on Sunday his country needs to reduce wasteful spending and “rationalize” subsidy programmes. The country’s spending could exceed revenues as early as 2017 under a worst-case scenario, according to the International Monetary Fund.
After the 2011 Arab Spring unrest, Saudi Arabia announced about $130bn in spending to ensure that the government’s welfare benefits reach poorer sections of the society. Qatar raised public salaries by as much as 120% and Kuwait offered citizens a year of free food. Al-Hashel’s predecessor Sheikh Salem Abdulaziz al-Sabah warned in January that Kuwait would be forced to take damaging measures such as devaluing the dinar or dipping into its Future Generations Fund if spending continues unabated.
Oman may have to start selling foreign assets or borrow on international markets in the coming years if spending rises during a period of lower oil prices and economic growth, a recent report in a central bank publication said.
Qatar is facing slowing economic growth as gas exports level off. While the IMF projects Qatar’s economy to grow 5.9% this year, the fastest in the six-nation GCC, its 34% ratio of gross government debt to GDP last year was second to Bahrain, according to Bloomberg data.
Qatar’s slowing growth may lead to “modest” budget deficits from 2015 through 2017, Farouk Soussa, Citigroup’s chief economist for the Middle East, said in a report last year. The forecast comes as the country has embarked on an estimated $200bn spending drive in the run-up to the 2022 World Cup.
In a welcoming sign, Gulf countries have started reining in spending as borrowing costs rise across the GCC after the US Federal Reserve started winding down its bond purchase programme. Saudi Arabia’s growth in expenditure will slow to 4.3% this year from 24% last year, while Oman budgeted a 5% increase after a 20% rise a year earlier, according to their finance ministries.
Qatar is now reviewing whether it will build all of the 12 stadiums proposed in its bid for the World Cup. While Qatar does not face difficulty in funding its big-ticket infrastructure upgrade drive, scaling back some projects down the priority list could reduce waste and ensure that key projects were delivered on schedule.
Gulf nations, which enjoy limited monetary policy manoeuvrability with their currencies pegged to the US dollar, should take advantage of the oil windfall to finance long-term labour market and intellectual property reforms.
Despite the now-abundant hydrocarbon resources, Gulf policymakers need to factor in a non-oil scenario in their vision for the future, because, “one day, oil will run out”.
Policymakers and experts, undoubtedly, are worried about the impact of such mammoth spending projections on GCC budget surpluses as well as growth outlook, Gulf Times reported.
Kuwait’s central bank governor Mohamed al-Hashel, in a rare public comment on policy issues, said on Sunday his country needs to reduce wasteful spending and “rationalize” subsidy programmes. The country’s spending could exceed revenues as early as 2017 under a worst-case scenario, according to the International Monetary Fund.
After the 2011 Arab Spring unrest, Saudi Arabia announced about $130bn in spending to ensure that the government’s welfare benefits reach poorer sections of the society. Qatar raised public salaries by as much as 120% and Kuwait offered citizens a year of free food. Al-Hashel’s predecessor Sheikh Salem Abdulaziz al-Sabah warned in January that Kuwait would be forced to take damaging measures such as devaluing the dinar or dipping into its Future Generations Fund if spending continues unabated.
Oman may have to start selling foreign assets or borrow on international markets in the coming years if spending rises during a period of lower oil prices and economic growth, a recent report in a central bank publication said.
Qatar is facing slowing economic growth as gas exports level off. While the IMF projects Qatar’s economy to grow 5.9% this year, the fastest in the six-nation GCC, its 34% ratio of gross government debt to GDP last year was second to Bahrain, according to Bloomberg data.
Qatar’s slowing growth may lead to “modest” budget deficits from 2015 through 2017, Farouk Soussa, Citigroup’s chief economist for the Middle East, said in a report last year. The forecast comes as the country has embarked on an estimated $200bn spending drive in the run-up to the 2022 World Cup.
In a welcoming sign, Gulf countries have started reining in spending as borrowing costs rise across the GCC after the US Federal Reserve started winding down its bond purchase programme. Saudi Arabia’s growth in expenditure will slow to 4.3% this year from 24% last year, while Oman budgeted a 5% increase after a 20% rise a year earlier, according to their finance ministries.
Qatar is now reviewing whether it will build all of the 12 stadiums proposed in its bid for the World Cup. While Qatar does not face difficulty in funding its big-ticket infrastructure upgrade drive, scaling back some projects down the priority list could reduce waste and ensure that key projects were delivered on schedule.
Gulf nations, which enjoy limited monetary policy manoeuvrability with their currencies pegged to the US dollar, should take advantage of the oil windfall to finance long-term labour market and intellectual property reforms.
Despite the now-abundant hydrocarbon resources, Gulf policymakers need to factor in a non-oil scenario in their vision for the future, because, “one day, oil will run out”.
Source:
Mubasher
