Gulf states risk deficit as oil price falls: IMF head
Arab News - 26 October, 2014
http://www.gulfinthemedia.com/index.php?id=722489&news_type=Economy&lang=en

Oil-dependent Gulf states will face budget shortfalls if the recent decline
in oil prices persists, International Monetary Fund chief Christine Lagarde
warned.

A sustained decline of $ 25 a barrel in the oil price would reduce the
revenues of most Gulf countries by eight percent of gross domestic product,
"and put many of them into a fiscal deficit situation," Lagarde said.

But the Gulf Cooperation Council (GCC) states have built up fiscal buffers
to cope with the immediate impact of the reduction in revenues, she said
after a meeting with regional finance ministers and central bank chiefs.

The combined GDP of the GCC last year reached $ 1.64 trillion, so in this
scenario the annual revenue of the six nations could plunge by roughly $ 130
billion.

The total revenue of the GCC states — 90 percent of which come from oil —
more than doubled from $ 317 billion in 2008 to $ 756 billion in 2012.

It declined slightly to $ 729 billion last year, according to IMF estimates.

The GCC groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, which
together pump 17 million barrels of crude oil per day and depend on oil for
about 90 percent of public revenues.

Oil prices have slumped by about 25 percent since June because of a
production glut, weaker demand and a gloomy world economic outlook.

The US benchmark West Texas Intermediate declined to about $ 81 a barrel on
Friday on the New York Mercantile Exchange.

Lagarde called on GCC states to implement reforms and stressed the urgent
need for fiscal consolidation -- an appeal echoed by Kuwait's finance
minister.

Anas Al-Saleh urged steps to tackle rising public spending, mainly on wages
and subsidies, as well as efforts to boost the role of the private sector.

"Comprehensive economic reforms, including reforming distortions in the
public finances, should be enforced," he said.

Al-Saleh said the Gulf states must diversify their economies and "reduce
dependence on oil".

Forecasts indicate a healthy economic growth for the six GCC nations
averaging 4.5 percent in 2014-2015, Saleh said.

"But these forecasts should be treated with caution in light of fast-paced
regional and international developments, particularly the drop in oil prices
which has started to impact the public finances of GCC states," the Kuwaiti
minister added.

Benefiting from high oil prices for more than a decade, the GCC states have
built fiscal reserves estimated at $ 2.45 trillion by the International
Institute of Finance.