Governments across the Gulf have begun to unveil their 2022 budgets and tight fiscal policy remains the order of the day. Saudi Arabia outlined a 6% cut in spending next year that is expected to push the budget into surplus for the first since 2013. And while Oman and Qatar both project small increases in expenditure in 2022, these are set to be more than offset by stronger revenues. The emergence of the Omicron variant has weighed on oil prices in recent weeks and, if we’re right in expecting them to fall further next year, the window that had opened up to loosen the purse strings will close. Tight fiscal policy will hold back recoveries in non-oil sectors, and we suspect that Oman and Bahrain will have to rely on financial assistance from the rest of the Gulf to avoid devaluations and defaults.
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