According to Bank of America Merrill Lynch, GCC countries are set to report a robust real GDP growth of 4.3% in 2012 on the back of accommodative fiscal policies and comfortable oil prices and output levels. Amid falling oil prices, the Bank indicated that the GCC countries would have a reasonable fiscal break-even at an oil price of US$ 80 per barrel.
The region is well positioned to cope with a global slowdown given the high level of savings, progress on corporate deleveraging, more robust banking systems and a still reasonable regional fiscal break-even oil price. It is worth noting that while break-even oil prices would remain reasonable, they are set to report their first decline since 2003, as per Bank of America Merrill Lynch.
In 2011, the improvement in break evens was limited to Saudi Arabia and the UAE. However, the large one-off increases in spending that pushed up break-evens last year are set to be unwound this year. Bahrain's position remains the most challenging in the region as oil and gas production is more or less flat, spending pressures remain high, and growth in the non-oil economy (and hence non-oil tax revenues) would remain weak. Bahrain also lacks the large backstops of oil savings that other GCC countries have, which could smooth the adjustment process.
The Mena Weekly Monitor – Bank Audi
4 July
