Gulf non-oil sectors struggle as austerity bites

The past month has brought further evidence that non-oil sectors in the Gulf are suffering as low oil prices have started to hit home. The picture is most stark in Saudi Arabia, where official data showed that the non-oil economy contracted by 0.7% y/y in Q1. Our GDP Tracker suggests that things have worsened since then, with the construction sector faring particularly poorly amid government spending cuts. It’s a similar picture elsewhere. Having been one of the Gulf’s best-performing economies in recent years, Qatar’s non-oil economy seems to have slowed sharply. In Bahrain and Oman, non-oil growth is at multi-year lows. With oil prices likely to stay low and fiscal consolidation set to continue for many years to come, a marked turnaround is unlikely anytime soon.