Gulf economies starting to slow

GDP figures released over the past month showed that the largest Gulf economies recorded strong growth towards the end of last year, but a fresh slowdown has got underway at the start of 2019. This has primarily reflected the impact of the OPEC-agreed oil output cuts. Admittedly, the US decision not to extend waivers on Iran’s oil exports means that the Gulf countries will probably start to raise oil production in the coming months. Even so, the year-on-year change in oil output – which is what matters for GDP growth – will still be weaker this year than last. And we maintain our view that oil prices will drop back over the course of this year, which is likely to result in fiscal policy being tightened in late-2019 and into 2020.