A steep fall in oil prices could wipe out a nominal surplus in the UAE consolidated budget through 2009 but the balance remains largely positive if return from assets and other revenues are included, according to a Kuwait bank.
After several years of massive surpluses, the country's consolidated finance account (CFA) could record a zero nominal surplus in 2009 but this will not pose any problem to the government, the National Bank of Kuwait (NBK) said.
In a study published this week, the government-controlled NBK said the disappearance of the surplus this year could be a result of lower oil export earnings and an increase in the UAE public expenditure.
"Further strong government spending growth in the UAE this year is likely to result in a sharp turnaround in the budgetary position," the study said. Assuming an average oil price of $50 a barrel this year, NBK expected the CFA surplus to fall from 15 per cent of GDP in 2008 to effectively zero in 2009.
"Although a major reversal, this trend provides little meaningful threat to the medium-term integrity of the government's overall financial position. A small deficit would pale beside the near $100 billion of budget surpluses accumulated by the UAE Government over the past four years," it said.
"More importantly, these (official) government figures on revenue and surpluses exclude the government's investment income earned from its overseas assets as well as profits from Adnoc…including these huge off-balance sheet items could add between 10-20 per cent of GDP to the headline budget surplus figure – still implying a very large underlying surplus in 2009."