The raft of budgets announced in the Gulf over the past month should help to ease concerns that these countries lack a clear agenda to adjust to cheap oil. The Saudi government has already cut energy subsidies and intends to reduce spending by around 14% this year. A privatisation drive, including a possible sale of a stake in oil-giant Saudi Aramco, is looking increasingly likely. Even Kuwait, which is arguably the best-placed country in the region to withstand low oil prices, has announced cuts to spending. All of this reinforces our view that fiscal policy will be relied upon to do most of the adjustment to low oil prices, and dollar pegs are likely to remain intact. But tightening purse strings mean that growth looks set to weaken over the coming years.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services