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19 March 2024

GCC spending, revenue seen up in 2011

The six Gulf Cooperation Council countries, which control over 40 per cent of the world’s recoverable oil deposits, assumed their 2011 spending at around $299 billion based on higher crude prices compared with 2010. (AP)

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By Staff

Gulf oil producers are expected to boost actual public expenditure to more than $300 billion in 2011 but the rise could be offset by a projected surge in revenue due to higher crude prices, according to a semi official study.

The six Gulf Cooperation Council (GCC) countries, which control over 40 per cent of the world’s recoverable oil deposits, assumed their 2011 spending at around $299 billion based on higher crude prices compared with 2010, said the study by the government-controlled Emirates Industrial Bank (EIB).

Revenues were estimated at about $313.4 billion, leaving a deficit of nearly $14.4 billion, EIB said, adding that the budgets of Kuwait, Bahrain and Qatar are based on its own estimates as they have not yet released fiscal data for this year.

“Previous experiences show that actual public expenditure will surpass $300 billion this year,” the Dubai-based EIB said.

“As for revenues, although they were estimated at around 12 per cent below the 2010 budgeted revenues, the actual revenues are expected to surge by between 15 and 20 per cent to exceed the real revenue last year…this is because of expectations oil prices in 2011 will be higher than in 2010.”

EIB gave no breakdown for overspending this year but analysts believe most of the excess expenditure is expected to be in Saudi Arabia, the world’s top oil exporter and largest Arab economy.

Over the past few years, Saudi Arabia has overshot budgeted spending by 10-20 per cent because of higher development needs, tempted by strong oil prices.

A breakdown by EIB showed budgeted spending and revenue stood at $11.17 billion in the UAE. In Saudi Arabia, spending was estimated at $154.2 billion and revenue at $143.6 billion, creating a deficit of $10.6 billion.

Spending and revenue were put at $67.5 billion and $90.2 billion in Kuwait, $37.5 billion and $43.5 billion in Qatar, $21.8 billion and $19.15 billion in Oman and about $6.79 billion and $5.8 billion in Bahrain.

“As was the case in 2010, the GCC budgets this year will act as a main source for economic stimulation and supporting some sectors which are still suffering from the 2008 global fiscal crisis,” EIB said.

“Since oil prices are expected to remain high in the next years, the GCC budgets clearly seem to be entering a new stage of fiscal surpluses which will have big positive effects on the domestic economy…but such surpluses again raise the question of the best possible ways of utilizing these funds in economic diversification programmes with the aim of lessening reliance on oil sales.”

In a previous report, EIB estimated the combined surplus in the GCC budgets at around $55.4 billion in 2010, nearly triple the 2009 surplus of $19.6 billion.
Oil prices in 2010 were nearly $15 above their $60 average in 2009 and are forecast to swell further through 2011.