Regional governments could face a US$175 billion hole in their fiscal surpluses from falling oil prices, according to IMF projections.
The IMF believes that lower oil prices could knock nearly 1 percentage point off economic growth rates in GCC countries, putting new fiscal pressure on policymakers in the region to reduce spending plans.
At the launch of the IMF’s regional economic outlook in Dubai, Masood Ahmed, the IMF’s Middle East director, said if oil prices hit $75 per barrel for a prolonged period it would knock 8 basis points off the GDP of Arabian Gulf countries, and could reduce the aggregate fiscal surplus for GCC government from a current projected $275bn to around $100bn.
The IMF also warned that Saudi Arabia could suffer a budget deficit as early as next year if oil continued to fall and public spending continued at current levels. The IMF previously forecast the kingdom’s public finances would be in the black until 2018.
If the oil price remains low, it would increase pressure on all regional budgets to cut public spending and curb subsidies on energy, utilities and other areas where consumers’ costs are partly met by the state.
Mr Ahmed said that the UAE was less subsidised than many other regional economies, but believed that Emirati authorities would also consider reducing subsidies. He and his team are in the UAE for a week of meetings with UAE officials.
"The GCC oil-exporting countries have the resources to continue with their spending plans next year, because they have the financial buffer provided by previous oil revenues. But there is a growing discussion about the need to address energy prices in the region because of the fiscal effect of subsidies and the growing levels of energy consumption, which are among the highest in the world," he said.
For the Middle East and North Africa region as a whole, the IMF is expecting GDP growth to rise from the current year’s 2.6 to 3.8 per cent, but Mr Ahmed said that forecast was put at risk by the deepening of regional conflicts, and the “rapid decline” in oil prices.
The IMF published bi-annual outlook document was prepared before recent falls in global oil prices. Goldman Sachs, the US investment bank, yesterday cut its forecasts for oil, setting a new target of $85 per barrel for Brent in the first quarter of 2015, down from a previous forecast of $100, and possibly at $75 in the course of the year. Other experts, such as Standard Chartered bank, are not so bearish, while officials in the biggest producer, Saudi Arabia, said recent falls were “temporary”.
Without the effect of falling oil, Mr Ahmed said that GCC economies would grow at 4.5 per cent next year, driven by non-oil sectors and supported by increased government spending and private sector credit expansion.
He said that growth in oil-importing countries in the Mena region would be “modest and lacklustre”, as the international environment and regional conflicts continue to weigh on economies.
“That growth rate is not high enough to make a dent in unemployment, which is the biggest challenge the region faces. Growth needs to be in the region of 8 per cent to have any effect on unemployment.” Growth would continue to be affected by what Mr Ahmed called “social and security transitions”.
The IMF said that despite progress on fiscal consolidation, public finance deficits and debt levels in oil- importing countries were still high.
On the UAE property market. Mr Ahmed said the IMF was less concerned than it had been a year ago when prices were rising fast, especially in Dubai. “For the last few months the pace of price increases has moderated quite a lot and credit goes to the government for its macroprudential measures on mortgages, loan-to-value levels and transaction-fee increases.”
The IMF estimates that Dubai public sector debt stands at $140bn, but that does not take into account recent payments made by Dubai World and Nakheel. The IMF is recalculating its estimate of Dubai debt in the light of these and other debt measures.
Mr Ahmed said that resources were available “in the rest of the world” to help fund Dubai’s latest rapid round of expansion ahead of the Expo 2020, but he said such projects had to be carefully managed and segmented to avoid the problems of “major expansions in the past in the UAE and Dubai”.
He said: “I would not encourage excessive risk-taking by government-related enterprises, and would urge a degree of coordination and oversight across projects.”
fkane@thenational.ae
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
The five pillars of Islam
Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
25-MAN SQUAD
Goalkeepers: Francis Uzoho, Ikechukwu Ezenwa, Daniel Akpeyi
Defenders: Olaoluwa Aina, Abdullahi Shehu, Chidozie Awaziem, William Ekong, Leon Balogun, Kenneth Omeruo, Jamilu Collins, Semi Ajayi
Midfielders: John Obi Mikel, Wilfred Ndidi, Oghenekaro Etebo, John Ogu
Forwards: Ahmed Musa, Victor Osimhen, Moses Simon, Henry Onyekuru, Odion Ighalo, Alexander Iwobi, Samuel Kalu, Paul Onuachu, Kelechi Iheanacho, Samuel Chukwueze
On Standby: Theophilus Afelokhai, Bryan Idowu, Ikouwem Utin, Mikel Agu, Junior Ajayi, Valentine Ozornwafor
The specs
Engine: Direct injection 4-cylinder 1.4-litre
Power: 150hp
Torque: 250Nm
Price: From Dh139,000
On sale: Now
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
IF YOU GO
The flights
FlyDubai flies direct from Dubai to Skopje in five hours from Dh1,314 return including taxes. Hourly buses from Skopje to Ohrid take three hours.
The tours
English-speaking guided tours of Ohrid town and the surrounding area are organised by Cultura 365; these cost €90 (Dh386) for a one-day trip including driver and guide and €100 a day (Dh429) for two people.
The hotels
Villa St Sofija in the old town of Ohrid, twin room from $54 (Dh198) a night.
St Naum Monastery, on the lake 30km south of Ohrid town, has updated its pilgrims' quarters into a modern 3-star hotel, with rooms overlooking the monastery courtyard and lake. Double room from $60 (Dh 220) a night.
Farasan Boat: 128km Away from Anchorage
Director: Mowaffaq Alobaid
Stars: Abdulaziz Almadhi, Mohammed Al Akkasi, Ali Al Suhaibani
Rating: 4/5
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The specs
Engine: 4.0-litre V8
Power: 503hp at 6,000rpm
Torque: 685Nm at 2,000rpm
Transmission: 8-speed auto
Price: from Dh850,000
On sale: now
RESULTS
Bantamweight: Victor Nunes (BRA) beat Azizbek Satibaldiev (KYG). Round 1 KO
Featherweight: Izzeddin Farhan (JOR) beat Ozodbek Azimov (UZB). Round 1 rear naked choke
Middleweight: Zaakir Badat (RSA) beat Ercin Sirin (TUR). Round 1 triangle choke
Featherweight: Ali Alqaisi (JOR) beat Furkatbek Yokubov (UZB). Round 1 TKO
Featherweight: Abu Muslim Alikhanov (RUS) beat Atabek Abdimitalipov (KYG). Unanimous decision
Catchweight 74kg: Mirafzal Akhtamov (UZB) beat Marcos Costa (BRA). Split decision
Welterweight: Andre Fialho (POR) beat Sang Hoon-yu (KOR). Round 1 TKO
Lightweight: John Mitchell (IRE) beat Arbi Emiev (RUS). Round 2 RSC (deep cuts)
Middleweight: Gianni Melillo (ITA) beat Mohammed Karaki (LEB)
Welterweight: Handesson Ferreira (BRA) beat Amiran Gogoladze (GEO). Unanimous decision
Flyweight (Female): Carolina Jimenez (VEN) beat Lucrezia Ria (ITA), Round 1 rear naked choke
Welterweight: Daniel Skibinski (POL) beat Acoidan Duque (ESP). Round 3 TKO
Lightweight: Martun Mezhlumyan (ARM) beat Attila Korkmaz (TUR). Unanimous decision
Bantamweight: Ray Borg (USA) beat Jesse Arnett (CAN). Unanimous decision
Killing of Qassem Suleimani
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
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Killing of Qassem Suleimani
The specs
Engine: 6.2-litre V8
Transmission: seven-speed auto
Power: 420 bhp
Torque: 624Nm
Price: from Dh293,200
On sale: now
MATCH INFO
Who: France v Italy
When: Friday, 11pm (UAE)
TV: BeIN Sports
World Test Championship table
1 India 71 per cent
2 New Zealand 70 per cent
3 Australia 69.2 per cent
4 England 64.1 per cent
5 Pakistan 43.3 per cent
6 West Indies 33.3 per cent
7 South Africa 30 per cent
8 Sri Lanka 16.7 per cent
9 Bangladesh 0
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
