Gulf economies set to accelerate through ’20

7% Jump in Saudi state spending next year

dubai — Gulf Arab economies are likely to accelerate over the next couple of years as governments boost spending, but growth will not return to the boom levels enjoyed before oil prices plunged in 2014, a quarterly Reuters poll of economists found.

Since mid-2018, the countries have been increasing oil production as restrictions imposed by a global agreement to restrain output have eased. This is expected to inflate gross domestic product in their oil sectors.

Meanwhile, higher oil prices are giving governments more money that they can spend to stimulate demand in the non-oil parts of economies. Brent crude is above $80 a barrel, near four-year highs, up from around $75 three months ago.

Consequently, Gulf Arab economies will probably enjoy their best environment for growth since the oil price crash.

“The surge in oil prices over the past few months ... is likely to tempt policymakers to loosen fiscal policy further,” said Jason Tuvey, senior emerging markets economist at London-based Capital Economics.

“Most governments are currently in the process of preparing their budgets for 2019 and the backdrop of higher oil prices means that the authorities are likely to put forward plans to raise spending significantly next year. That should help to support growth in nonoil sectors.”

Saudi Arabia has already said it plans to increase state spending over 7 per cent next year, and on Tuesday, it appeared to loosen fiscal policy slightly in an announcement on annual allowances for state employees.

The poll of 17 economists projected Saudi gross domestic product would grow 2.0 per cent this year, 2.5 per cent in 2019 and 3.0 per cent in 2020, after shrinking 0.9 per cent last year, its first decline since the global financial crisis in 2009.

Growth in the UAE and Kuwait is also expected to accelerate in 2019 and rise further or maintain that level in 2020. —