Economies of the GCC
The party is over for the GCC. Oil prices kept tumbling despite the cut in production. Today the price of oil went below US $ 40. This comes at a time when tourist numbers are also falling and states like Dubai who depend a lot on real estate are carrying the brunt of the credit crunch and the mortgage crisis that started in the USA. The Real Estate economy is slowing down. In a recent article by Arabian Business Magazine, they quote the IMF and the impact of oil prices on each of the economies of the 6 GCC countries. The worst affected by the slide in oil prices will be Oman. The least Qatar. The IMF measures the budget deficit each will have depending on a certain level for oil prices. For example, Saudi will record a budget deficit if oil prices stay around US $ 49, while the UAE will only be affected when the price hits US $ 23. Qatar is the most resilient being able to rely not only on oil but natural gas to back up the economy. In all instances, spending on public projects will slow down and some projects are going to either be delayed or scrapped. A lot has been said in recent years on strengthening the economies of the GCC beyond oil, but it seems that at the first sign of low oil prices, the economy suffers tremendously. It is clear that the economic cycle can only be a healthy one if you have healthy oil prices. To add to the problem, it is not only an oil price free fall. The world economy is suffering from an unprecedented crisis. So how do you deal with the upcoming downturn?
In a recent press release, Dubai insists to carry on with its plans for DSF 2009 getting the backing of the usual companies and hoping to rejuvenate the economy. But where will the buyers come from? European tourists are drying up due to the strengthening of the US dollar vs. other currencies in Europe. The only possible inflow will be from the GCC at least for now.
Compare what is happening in Dubai with what is happening in Beirut at this time. We’ve been told that hotels are witnessing peak reservations, flights are fully booked and Lebanese from all over are flocking in in addition to GCC citizens who either have second homes there or happily fill up the hotels and chalets.
January 2009 will be the litmus test of what actually the year will be like for the GCC. I guess people are enjoying the last few days of the year in preparation for things to come.
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