Sign in Register
Posted On: 19 January 2009 01:17 pm
Updated On: 12 November 2020 02:09 pm

Gulf states except Qatar may fall into recession if oil touches $25: HSBC

Paper Boy
Paper Boy
Discuss here!
Start a discussion
DUBAI Gulf Arab oil producers are poised to witness an abrupt slowdown in economic growth this year and could face recession if average crude prices fall toward $25 a barrel, HSBC said. If oil prices fell to $25 a barrel this year, all Gulf states, except possibly Qatar, would fall into recession, HSBC said. GDP growth in Qatar, the world’s largest exporter of liquefied natural gas, is likely to fall to 9.8 percent this year from 15.2 percent in 2008, HSBC said. “2009 will feel like recession in much of the Gulf, but economic deceleration is not likely to lead to derailment,” HSBC’s regional economist Simon Williams said in a research note received by Reuters on Sunday. “Although we think Gulf states will be ready to run deficits, dramatically reduced revenues will likely lead Gulf governments to pare back spending plans,” he said. HSBC expects oil prices to average $45 a barrel this year — less than half the average 2008 price, forcing at least Saudi Arabia, Bahrain and Oman to run fiscal deficits as they keep spending to sustain their economies. The bank said Saudi Arabia’s budget deficit is likely to hit about $26.5 million this year — higher than the finance ministry’s $17.3 billion projection last month. The kingdom posted surpluses of $378.1 billion in the 2003-2008 period. “After five years of plenty, the Gulf is well placed to maintain order in the face of a sharp drop in oil revenues,” HSBC said. “Since oil prices began to rise in 2003, the region’s economic structure has begun to adjust to higher prices. Fiscal spending, in particular, has risen as revenues have soared, driving the minimum oil price required to hold the budget in balance upward.” Economic growth rates across the oil-exporting region would slow abruptly this year to as low as 0.8 percent in Saudi Arabia, 0.9 percent in Kuwait and 1.1 percent in the United Arab Emirates, HSBC said. The three largest Gulf economies posted growth in real gross domestic product (GDP) of 4.3 percent, 6.7 percent and 7.1 percent last year.