Gulf states that depend heavily on energy exports for most of their revenues should brace for a long period of low oil prices and subdued economic growth, experts have warned.
Signs of an “economic war” between the United States and China, the world’s largest economies, and an expected global economic slowdown starting next year will dampen demand for oil, the experts told a conference in Dubai, AFP reports from the emirate.
“Oil prices will remain low for a long period,” former Lebanese minister of economy and trade Nasser Saidi told the one-day Arab Strategy Forum. A cooling of the global economy will reduce demand for oil, which coupled with rising competition from renewable energy sources and shale crude will lead to low oil prices, said Saidi, who is now a consultant.
“This will negatively impact growth in the whole (Arab) region … The whole area will face a financial and economic crisis,” he said.
The six member nations of the Gulf Cooperation Council (GCC) earn more than 80 percent of their revenues from energy. The GCC states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — have lost hundreds of billions of dollars in oil revenues since crude prices crashed in mid-2014.
Oil prices later rebounded after OPEC and non-OPEC producers reduced their production. But they slid again when producers boosted output earlier this year to compensate for expected losses from Iran because of the re-imposition of US sanctions.
Oil prices have lost more than a quarter of their value compared with a four-year peak over $85 a barrel seen in October, with benchmark Brent crude trading at around $61 a barrel in London in early December.
World Bank senior vice president Mahmoud Mohieldin warned that economic growth in the GCC region was still dependent on oil price movements.
“Now, we are at a time of uncertainty … Growth in Gulf states is forecast at three percent next year … but this could be revised,” following the drop in oil prices, Mohieldin noted.
He reminded the conference that the unemployment rate among Arab youth is 30 percent and higher among females, adding that growth is not producing enough jobs.
OPEC and non-OPEC producers decided to cut production by 1.2 million barrels a day from January to shore up prices, which some analysts warned would hit economic growth.
“We think that the OPEC deal will have an overall negative impact on GDP (gross domestic product) growth in the Gulf over the coming quarters,” London-based consultancy firm Capital Economics said last week.