Arabian Gulf oil exporters well equipped to weather falling prices

Arabian Gulf oil exporters are expected to weather the slide in the price of crude better than their counterparts in the wider Arab world, says the Arab Monetary Fund (AMF).

They are expected to clock a growth rate of 3.2 per cent compared to 1.7 per cent for other Arab oil-exporting countries this year.

The drop in oil prices and internal situations in some oil-exporting Arab countries will pull back the growth in the Arab economies, according to the Abu Dhabi-based agency.


It forecast overall economic growth of 2.9 per cent this year, down from 3.7 per cent last year for Arab oil-exporting countries.

However, Gulf economies are expected to perform better than Arab oil-exporting countries such as Iraq and Libya, thanks to the performance of non-oil sectors pushed by public spending and economic diversification, according to the Arab Economic Outlook from the AMF.

Last year, Gulf economies recorded a growth rate of 4 per cent.

“We may not see the effects of low oil prices on the main street, but deposit growth in the banking system is slowing, and short-term interest rates are starting to go up,” said Sanyalaksna Manibhandu, a senior analyst at NBAD. “The problem is not only about low crude prices but also the dollar has got stronger.”

For diversified economies, such as Dubai, tourism is also expected to take a hit with fewer tourists arriving from the euro zone.

Prices of Brent crude inched up 2.25 per cent to close at US$57.87 per barrel on Sunday.

Oil-importing Arab countries such as Egypt are expected to benefit from the relatively stable environment, and the impact of economic reforms implemented since the Arab Spring, coupled with low oil prices.

As such, these countries could clock growth of 3.7 per cent this year compared to 2.8 per cent in2014, the AMF report said.

“The lower prices of crude and gas, and a further boost from private and public sector investors from neighbouring countries will positively impact Egypt,” Mr Manibhandu said.

North African economies such as Egypt, Morocco and Tunisia could record economic growth of between 5 and 6 per cent this year but they would need their governments to push through reforms to support investment, according to another report from the London-based consultancy Capital Economics.

As prices of goods in the international market decline, inflation in Arab economies is are expected to decrease to 4.14 per cent this year from 4.27 per cent last year. That will be balanced by domestic demand and a recovery in the real estate sector.

Countries such as the UAE, which has a fixed exchange rate, are expected to tighten their monetary policy in the second half of the year.

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