Rising deficits and constrained government budgets in the Gulf will have the biggest macroeconomic impact on the region's energy industry in 2016 according to 43 per cent of respondents to a Gulf Intelligence Industry Survey of 250 energy industry professionals operating in the region.

Economies in the Gulf including Saudi Arabia and the UAE face challenging times in 2016 as the oil price hovers around the $30-per-barrel mark hitting a 12-year low.

Fiscal pressure has been steadily building since oil prices started a sharp downward trend in June 2014 with Saudi Arabia posting its biggest ever budget deficit last December at SR326 billion ($86 billion) - equivalent to about 16 per cent of GDP.

Kuwait posted its first budget deficit in 15 years in mid-2015 with both the UAE and Oman also facing larger deficits.

"In 2015 we saw that most of the Gulf countries took a budget hit from lower oil prices but they kept spending relatively high and their economies kept growing" Marios Maratheftis global chief economist at Standard Chartered Bank said.

"2016 will be different as it looks like Saudi Arabia is not willing to keep spending as it was and neither is Oman. If oil prices average $40 per barrel this year we should expect less spending from GCC governments which will translate into lower economic activity."

The majority of Gulf countries have taken the unprecedented move to reduce fuel subsidies in a bid to offset growing budget deficits. Kuwait the UAE and Saudi Arabia were among the first countries in the Gulf to introduce cuts in 2015. Another wave of subsidy reforms is expected in the Gulf this year which is likely to include Oman's first subsidy cuts.

Over a third of respondents (38 per cent) expect China's recent economic uncertainty will have the greatest impact on the Middle East's energy industry as the country's growth slowed to a 25-year low in 2015. China's 6.8 per cent growth in the fourth quarter of 2015 alone is more than respectable by global standards but it marks a significant slip from the country's usual 10 per cent growth. Questions still abound over what financial measures Beijing plans to introduce in 2016 to curb any further losses. The United States' decision last month to increase interest rates for the first time in a decade and Europe's poor economic growth are expected to have little impact on the Middle East's energy industry this year with only three per cent and one per cent of respondents respectively highlighting them during the GI Industry Survey. The primary impact of the US' move will be reflected by emerging countries' currencies including Turkey Brazil and Malaysia.

Dr Emmanuel Ibe Kachikwu Nigeria's Minister of State for Petroleum Resources and Opec president in 2015 said an emergency meeting of Opec members may be called during the first quarter of this year to address lower oil prices.

About half (51 per cent) of respondents said oil prices are unlikely to rise above an average of $40 a barrel this year while nearly a third of respondents (28 per cent) cited $30 per barrel.

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