Financial burden persists in GCC despite oil price recovery -- Kamco

KUWAIT, July 23 (KUNA) -- The onus would continue to remain on fiscal consolidation for GCC nations, despite a recovery of oil price from its lows in early 2016, according to a report released by KAMCO company on Saturday.
Public spending initiatives in the GCC countries would need to be intensified, along with the implementation of other policy side initiatives, which were either recently announced or are in the pipeline, to propel the non-oil economy to higher growth. Nevertheless, if the alternate global risk scenarios were to materialize, this would have a direct impact on oil-demand growth, and the resultant growth of GCC economies from lower oil revenues.
Oil prices assumed for their July update were higher by USD 10/barrel for 2016 & 2017, as compared to April 16 forecasts. Nevertheless, "we believe the resumption of oil production activity in Nigeria and Canada should put additional pressure on the demand-supply situation and on oil prices," KACO Research said in the report.
GCC economies would continue with their fiscal consolidation efforts in 2016 and 2017, in an effort to strengthen the non-oil economy. Public spending remains key, and would be needed along-side other policy side initiatives, which have been introduced, or are in the pipeline in ensuring a smoother transition towards desired objectives. Downside and severe scenarios are expected to have a negative impact on the growth of GCC economies as well. If these scenarios play out, it would result in lower global growth and subdue business and consumer confidence leading to underinvestment, mainly in Europe and the UK. This would in turn affect demand for oil. Under such scenarios, "we further expect the economic transition for the GCC to take longer than expected."(end) fnk.rk