Mubasher: Non-oil sectors in Saudi Arabia and the UAE, the two largest economies in the Gulf region, are starting to recover from their slumps in early 2016, Capital Economics said in a recent report.
Both countries have been major beneficiaries from the OPEC deal in November to cut output, as shown by the latest activity data.
“While they reduced oil production at the start of this year as the deal came into force, the impact on overall energy export revenues has been more than offset by the 20% rise in oil prices since the agreement was announced," the report indicated.
The increase in oil revenues has allowed governments to ease fiscal austerity, as the Saudi government has resumed payments to contractors, which has reportedly allowed some construction projects to restart.
“If oil output and prices were to stay at their current level throughout 2017, we estimate that combined oil export revenues would be more than $35 billion (around 3.5% of GDP) higher than they were in 2016,” the report added.
