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Global Capital, February 2016

The Gulf states are steadily coming to terms with a new and most unwelcome reality: sustained low oil prices. Digesting the fact that these prices appear to be here to stay, in the near term at least, means accepting some difficult home truths about deficits, infrastructure spending, liquidity and market performance. 

“The lower oil price has of course made a substantial difference to GCC countries, both in terms of their economies and their mood,” says Chavan Bhogaita, managing director and global head of market insights and strategy at National Bank of
Abu Dhabi (NBAD).

“The times of ample budget surpluses and year after year of asset accumulation are over, for now at least. We are now in times of budget deficits and asset depletion.”

Just how bad is it? Nothing disastrous, at this stage. To varying degrees, the Gulf economies enjoy considerable buffers of reserves, whether in sovereign wealth funds or bank deposits; they have mainly run surpluses for years and have little or no debt; and even now, their economies are still growing. The threat is of slowdown, not recession. 

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Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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