Market experts are of the view that Gulf countries will be in a better position than ever to recover from the global economic crisis due to rising oil prices when compared to non-oil-producing countries of the world. Some also think that there will be more benefits to these oil-dependent economies than these expectations once the prices inch toward a two-year high of $100 a barrel.
Aidha Saleh Al Beraiki, senior economist in Abu Dhabi with the Department of Planning and Economy of the United Arab Emirates, said, “For economies that are still heavily dependent on hydrocarbons, this leads to higher government revenues, which will allow for resuming or continuing the large investments in infrastructure and other projects.” Mr. Beraiki added, “This increase in the overall economic activity and confidence will also have a positive impact on banks and encourage more lending.” He explained that there is also a multiplier effect that will promote activity in the private sector while these public investments could be good in themselves in terms of increasing short-term economic growth.
Philippe Dauba-Pantanacce, senior economist for the Middle East and North Africa region for Standard Chartered Bank, based in Dubai, said, “Between 2009 and 2010, the average oil price jumped 30 percent, which represents a significant surplus to the oil proceeds and implied higher liquidity for public finances.” The statement means that regional governments have excess funds that can translate to improvements in spending on investments.
Amer Halawi, head of research at Shuaa Capital, one of the largest publicly traded financial services firms in Dubai, said, “Sustainably high oil prices could result in the revision of budgets going forward,” and “In some cases, budget excess from higher oil prices can feed through quite quickly to the banking system in the form of deposits, thereby easing liquidity, though this is not systematic.”