- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 05:28 06:47 12:13 15:10 17:33 18:51
Gulf oil producers have intensified their efforts to tackle domestic unemployment and other social issues by sharply raising public spending, spurred by political unrest sweeping the Middle East and North Africa.
The six Gulf Cooperation Council (GCC) countries, which control over 40 per cent of the world’s recoverable oil deposits, have boosted public expenditure by up to 60 per cent since the 2008 global fiscal crisis while most of them have announced measures to raise salaries, provide more social aid, create jobs for citizens and build houses.
“The Arab Spring movements in the broader Mena region, unrest in Bahrain, and to a much lesser degree Oman, have focused the minds of GCC leaders,” Saudi American Bank Group (Samba) said.
“Their immediate response has been to accelerate measures aimed at addressing unemployment and social issues in the region, primarily through an increase in state employment and spending on social issues, housing and infrastructure….these additional spending commitments are substantial and come on top of already expansionary fiscal policies.”
The report showed government spending in GCC states has cumulatively risen by 30-60 percent since the onset of the 2008 global crisis.
It said such high levels of public spending have bolstered the non-oil economy in the GCC and helped prop up confidence which remains somewhat fragile given the uncertain global climate and political changes underway in the Mena region.
Aggregate GCC non-oil growth is projected to rise to 4.7 per cent this year and hold at close to this rate through 2012, it said.
“This, combined with a surge in oil production during 2011 should raise GCC aggregate real GDP growth to seven per cent.”
Citing international forecasts and its own estimates, Samba expected GCC oil production to be up close to 10 per cent in 2011 as output was raised to offset the loss of Libyan output because of the war. Saudi Arabia was the main beneficiary with output up more than 12 percent.
However, with Libyan oil now returning to the market after the end of the conflict and the outlook for oil fundamentals weaker, the GCC oil sector is unlikely to contribute much to growth in 2012, the report said.
“In fact, declining crude output and weaker oil prices may act as a drag on economic performance, although gains in NGLs are still expected….as a result, despite sustained growth in non-oil sectors, GCC headline real GDP growth is expected to slow sharply to under four percent, although much of this will reflect the end of extremely rapid growth in Qatar as the last of its major LNG projects have now been brought on line.”
Samba said the surge in crude prices and increased oil production in the region during 2011 are expected to largely boost fiscal surpluses in the GCC despite the high levels of spending.
Overall, the GCC fiscal surplus is expected to rebound to 13 percent of GDP in 2011, although Bahrain will post a deficit as a result of the economic dislocations caused by civil unrest earlier in the year, it said.
“Looking ahead, softer oil prices in 2012 and less room for production gains suggest that the GCC’s fiscal position will weaken, and it is clear that finances are now more vulnerable to oil prices movements,” it said.
A breakdown showed Saudi Arabia, the world’s oil basin, boosted crude output from 8.23 million bpd in 2010 to an average 9.25 million bpd in 2011. It expected production to shrink to nine million bpd in 2012.
The UAE’s production rose from 2.3 million bpd in 2010 to 2.51 million bpd in 2011 and is projected to fall to 2.35 million bpd in 2012. Kuwait’s supplies grew from 2.3 million bpd to 2.47 million bpd and will likely fall to 2.35 million bpd.
Qatar, a small OPEC oil producer but the world’s top LNG supplier, produced 0.8 million bpd in 2010-2011 and the level will remain unchanged in 2012, according to Samba.
Follow Emirates 24|7 on Google News.