(MENAFN- Khaleej Times) The free-fall of oil price is not an immediate threat of economic crisis for the Gulf countries, Dr Henry Azzam, former chief executive officer of Deutsche Bank in the Middle East and North Africa, said at the Arab Strategy Forum on Sunday.
Dr Azzam focused on the current economic situation in the Arab world and highlight the opportunities and challenges in an attempt to draw a picture of the future of the Arab economy in 2015.
He predicts the GCC and the Opec will not reduce their oil production as they have cash reserves/surplus that can help them finance the deficit.
"I don't expect a drastic slowdown in public spending across the GCC because of the decline in oil prices. There could be some slowdown in growth in the short run but this is temporary and the growth is expected to bounce back as oil prices recover," he said. "There is a correlation between the decline in oil prices and the fall of the stock markets. It is an indicator of the lack of confidence and trust the private sector feels. Private sector companies are fearful of a slowdown in the implementation of projects and a reservation of banks in lending. It is well known that the private sector formed the engine of the GCC economies and has contributed to their prosperity."
"We are witnessing the second boom in the Gulf countries. The fall in oil prices will have a positive impact on some countries, especially the ones that import oil except Syria that already suffers from economic collapse. Non-oil-exporting countries such Libya, Iraq and Algeria will also not be in a good situation."
Quoting a study conducted by McKinsey, he said: "If the oil prices remain at $70 rate per barrel, investments in shale gas will fall. Shale constitutes 17 per cent of the total world fuel production. There's no doubt that we will see an increase in consumption and a decline in investment in conventional oil. Within a year or two oil prices will healthier and fairer levels."
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