Gulf countries continue adjustment to cheap oil

Saudi Arabia’s ambitious plans to overhaul its economy have grabbed the headlines in recent days, but the past month has seen a number of other Gulf countries announce further measures to deal with the fallout from low oil prices. Qatar has followed in the footsteps of the UAE by liberalising fuel prices. Meanwhile, the Kuwaiti parliament has passed a law that will allow the government to raise water and electricity tariffs for expats, although the changes aren’t expected to come into force until September next year. At the same time, GCC governments have turned to the bond markets in order to cover budget shortfalls. Abu Dhabi raised US$5bn in its first debt sale since 2009, while Oman is on course to issue its first international bond in almost 20 years. All of this supports our long-held view that the Gulf countries will rely on fiscal consolidation in order to make the adjustment to low oil prices, which will keep economic growth subdued.