Falling oil prices pose huge challenges to GCC

GMT 14:45 2014 Tuesday ,02 December

Arab Today, arab today Falling oil prices pose huge challenges to GCC

Kuwait's crude oil
Kuwait - KUNA

A recent economic report has expected falling oil prices to pose significant challenges to the Gulf Cooperation Council (GCC) countries, amid weaker demand and increased supply and s stronger US dollar.
The impact of continued oil price weakness could put considerable pressure on GCC economies and affect real GDP growth, unless they step up diversification efforts, added the latest Economic Insight report by the Centre for Economics and Business Research (Cebr).
Cebr prepared the report for the Institute of Chartered Accountants in England and Wales (ICAEW), a world leading professional membership organization.
It said that according to the International Monetary Fund (IMF) projected 2015 breakeven prices, at which oil must sell in order to balance the budget, put Bahrain and Oman under the greatest pressure at USD 116 and USD108 per barrel respectively.
Saudi Arabia, Qatar, UAE and Kuwait are better placed, thanks to large and mature domestic banking systems, access to international markets and large sovereign wealth funds generating ample investment income, the report said.
The Cebr report noted that a cut in production levels could be considered in response to falling prices, as done in the past by Saudi Arabia. However, the spending plans suggested by the breakeven prices imply that most GCC hydrocarbon exporters do not have the flexibility to endure sustained reductions in either output or revenues.
Latest projections for 2016 government net borrowing in GCC countries, according to the report, show Kuwait, UAE and Qatar with the highest surpluses; 24.1 percent, 9.8 percent and 6.6 percent of their respective annual GDP.
It also referred to good news in increased demand from emerging markets, particularly in the ASEAN region, it noted.

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