The recovery in oil prices since the start of this year is only likely to provide brief respite for the Gulf economies. Brent crude briefly touched $68pb this month, marking a 30% rise from the trough reached at the end of last year. This will provide a $120bn (6% of GDP) boost to the Gulf’s hydrocarbon exports on an annualised basis. However, we think the rebound in oil prices will soon go into reverse. If we’re right, budget and current account positions across the Gulf will deteriorate again and fiscal austerity is coming back on to the agenda. This is a key reason why we think that economic growth in the Gulf will disappoint most analysts’ expectations this year.
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