(MENAFN- Kuwait News Agency (KUNA)) Lower oil prices will positively affect the GCC countries as they will have to diversify their economies away from oil, said a specialized economic report.
Due to the region's accumulated reserves and low debt levels, the GCC countries will continue to spend at the current rate, but an extended period of low oil prices will fuel greater urgency to execute diversification plans and introduce reforms, particularly the reduction on subsidy bills, said the report by the Asiya Investments, a subsidiary of Kuwait-based Asiya Capital Investments Company.
Oil prices are now at their lowest level in a decade, roughly 50 per cent below last year's peak of USD 115, it added. The oil-exporting countries are facing difficult periods, but the strength of these periods varies substantially among them, it said, noting the cost of producing a barrel of oil diverges significantly between countries.
Growth in the Middle East oil-exporting countries remains strongly linked to oil prices as oil exports constitute the main source of revenue, which translates into subsidies and infrastructure projects, it showed.
Many of these countries have also accumulated sizeable financial reserves, it said, indicating that the only country in the MENA that can still generate a fiscal surplus with current oil prices is Kuwait, which posts a breakeven price of USD 50 for 2015, as estimated by the International Monetary Fund (IMF).
It added that Qatar and the UAE's economies are more diversified than Kuwait's, but larger fiscal spending have resulted in breakeven prices of around USD 70 per barrel.
Saudi Arabia's breakeven price is around USD 85 per barrel, it said, adding that even though it produces more than three times as much oil as Kuwait, its large spending on infrastructure and diversification projects makes the fiscal balance more sensitive to changes in oil prices.
The most vulnerable countries in the region are Bahrain and Oman, whose breakeven prices stand at around USD 100 per barrel, it mentioned.
In Bahrain, with a mere 50,000 barrels per day production rate - sixty times smaller than Kuwait's three million barrels - subsidies and welfare require around 50 per cent of the government's total spending, the report said.
In the case of Oman, 75 per cent of its revenue comes from proceeds of 950,000 barrels sold per day, it showed.
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