Oil prices may be soft, and geopolitical tensions high, but Gulf economies are more resilient than in the past. In a new report, S&P Global Ratings said it expected economic growth across the Middle East to average around 3.4% this year, helped by higher oil and gas output and strong non-oil activity, particularly in Saudi Arabia and the UAE.
Most governments have fairly strong balance sheets, and the expansion of their tax bases in recent years — with the introduction of corporate income taxes, sales tax, and higher excise duties on tobacco and sugary drinks — means they can more easily protect themselves against external pressures.
S&P said the outlook for sovereign credit across the region this year was stable. That’s good news for governments that will need to sell bonds to cover their outgoings — the agency’s forecast average oil price of $60 a barrel this year is below what many countries need to balance their budgets. The ratings agency also expects foreign direct investment into the region to remain weak, meaning the onus on paying for economic diversification will rest firmly with Gulf governments themselves.