GCC economies can gain from oil prices

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The Gulf region is expected to experience an oil-fuelled economic boom based on rising crude prices and its positive effects on spin-off industries, according to regional analysts.

Oil prices rose to an average of US$123 a barrel in March, representing the highest monthly average since July 2008 and above expectations. The higher export earnings means GCC countries can increase spending on infrastructure and other industries that will serve to boost GDP.

“In the UAE, higher oil prices should provide authorities with additional comfort to push ahead with recently approved infrastructure projects and spending,” Khatija Haque, senior economist at Emirates NBD, was quoted as saying in Gulf News.

Future declines in oil prices can be mitigated by higher-than-expected prices in 2012, which would allow governments to widen fiscal reserves and repatriate oil revenues, with banks continuing to benefit from better liquidity.

Dubai’s non-core sectors, such as trade, tourism and retail, has gained from the robust regional business environment while Abu Dhabi is enjoying high oil prices and output, according to the report.

However, some economists warn that the increased wealth represents savings as opposed to consumption growth and governments will therefore need to invest surpluses into domestic economies to make the most of the earnings from higher oil prices.

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Reading Time: 1 minute

The Gulf region is expected to experience an oil-fuelled economic boom based on rising crude prices and its positive effects on spin-off industries, according to regional analysts.

Reading Time: 1 minute

The Gulf region is expected to experience an oil-fuelled economic boom based on rising crude prices and its positive effects on spin-off industries, according to regional analysts.

Oil prices rose to an average of US$123 a barrel in March, representing the highest monthly average since July 2008 and above expectations. The higher export earnings means GCC countries can increase spending on infrastructure and other industries that will serve to boost GDP.

“In the UAE, higher oil prices should provide authorities with additional comfort to push ahead with recently approved infrastructure projects and spending,” Khatija Haque, senior economist at Emirates NBD, was quoted as saying in Gulf News.

Future declines in oil prices can be mitigated by higher-than-expected prices in 2012, which would allow governments to widen fiscal reserves and repatriate oil revenues, with banks continuing to benefit from better liquidity.

Dubai’s non-core sectors, such as trade, tourism and retail, has gained from the robust regional business environment while Abu Dhabi is enjoying high oil prices and output, according to the report.

However, some economists warn that the increased wealth represents savings as opposed to consumption growth and governments will therefore need to invest surpluses into domestic economies to make the most of the earnings from higher oil prices.

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