(MENAFN- The Peninsula) A mature domestic banking system, access to international market and large sovereign wealth funds in generating ample investment income will help Qatar cushion the falling oil price pressures.
The latest Economic Insight released by Institute of Chartered Accountants in England and Wales (ICAEW) noted falling oil prices - driven by weaker demand, increased supply and a more powerful US dollar - will put considerable pressure on GCC economies. But Qatar, Saudi Arabia, UAE and Kuwait are better placed.
Latest projections for 2016 government net borrowing in GCC countries show Kuwait, UAE and Qatar with the highest surpluses; 24.1 per cent, 9.8 per cent and 6.6 per cent of their respective annual GDP. Bahrain is the only GCC country with a current fiscal deficit of 4.8 per cent, although Oman's net borrowing is forecast to reach 1.8 per cent of GDP in 2016.
According to the International Monetary Fund, the projected 2015 breakeven prices, at which oil must sell in order to balance the budget, put Bahrain and Oman under the greatest pressure at $116 and $108 per barrel respectively.
Douglas McWilliams, ICAEW economic adviser and executive chairman of the Centre for Economics and Business Research (Cebr), said: "Large shares of government budgets in the GCC are swallowed up by public spending, such as generous public sector wages, subsidies for food and fuel and direct cash to households. Reforming these subsidies could also help to reduce the strain on public finances as they face lower oil revenues."
On Qatar, the report noted its' GDP contracted during Q2, with strong growth in non-oil sectors only partly offsetting a slowdown in the hydrocarbon sector. Annual growth is expected to be 6.3 per cent this year, rising to 7.2 per cent in 2015, assuming announced infrastructure projects proceed as planned. Growth is expected across construction, financial and business services, and tourism. Intensive capital investment should buttress GDP expansion across the medium term.
Meanwhile, reports released by two major banking industry leaders on Monday noted GCC equity markets witnessed a sharp fall across the board over the past one month on fall in oil price. Global headwinds will further add to the woes, Global Investment House (GIH) report said.
The QNB Investment Outlook projected GCC equities 'neutral'. "We are moving from positive to neutral mainly because of the sharp decline in the crude oil prices, which is the driving force of the economies in GCC countries, this would put some pressure in the equity market in the region and cause the major three markets like Qatar, Saudi Arabia and UAE to shed lots of their previous gains in the year". The fundamentals are still strong in the region".
The report said lower commodity prices may dent the outlook. "The mixed response to lower oil prices suggests that the positive outlook for region will remain. We therefore keep our forecast at 4.5-5 percent for 2014 and 5 percent-5.5 percent in 2015.
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