Gulf Council Countries may see their borrowing needs plunge from $270 billion to $10 billion in the next three years, if oil prices remain high, according to Goldman Sachs Group.
Oil prices have rallied almost 80 per cent since the start of November to about $70 a barrel as major economies rolled out coronavirus vaccines and the Opec implemented deep production cuts. The shock move by Opec+ triggered a rally in Brent prices higher than annual average levels needed for the region’s largest producers, including Saudi Arabia, to balance their budgets this year. The average price needed to balance GCC members’ current accounts is lower at $50 per barrel, Goldman said, giving comfort regarding the external outlook and the resilience of currency pegs, even if prices decline from current levels.
Monica Malik, chief economist at Abu Dhabi Commercial bank, sees a potential for budget surpluses, provided the oil price remains stable.
Local economy rally
It is Goldman Sachs assessment that these surpluses are likely to be erased by increased spending.
Dubai, as the business and services center in the region is thus perfectly poised to take full advantage of the institutional investments in infrastructure and increased business transactions. Making this a momentous time to start activities and ride the market as it climbs.
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