Kuwait
Kuwait was once famously described as an oil well masquerading as a country. The analogy is a little unfair but it does illustrate the extent to which the emirate is dependent on oil. Its reserves are more than 90 billion barrels-enough to last into the 22nd century at current production level. In 1999/2000, when the financial year was changed to end in March rather than June, Kuwait achieved a budget surplus of KD1.7bn ($5.6bn) in only 9 months the highest surplus in 20 years. The previous year, Kuwait had clocked up a surplus of KD 1.25bn ($4.1bn).
The National Bank Kuwait, estimates that the Kuwaiti government will run a book deficit of KD600m ($2.0bn) this year on the basis of $19.8 per barrel. But the government does not typically spend its capital budget, so the actual is likely to come in closer of KD100m ($33m).
Others are less sanguine. And not only because of a fall in oil prices, but because Kuwait’s quota within Opec, the oil-producing cartel, has been successively cut from 2.14m b/d to 1.87m.
Kuwait already lost 25 per cent of the oil price and, in term of quota, after three reductions, have seen production fall. Kuwait and the Opec countries can live with $17 and $18 a barrel for a time. They have some meat and some fat. But this fiscal year will be worse on both fronts (production and prices) and the trend is going to continue. Another reason for pessimism is that Kuwait’s investments abroad, which contribute substantial income to the government, have been dropping like a stone as world markets languish. The trend in April 2000 with the fall in the international high-tech market, but was exacerbated by September 11.
Saudi Arabia
The outlook for the Saudi economy before the September 11 attacks on the US was favourable. Oil prices were strong in the first half of the year and economic reforms, while generally slow, were given a boost with the unveiling of the gas institutive allowing eight big foreign oil companies to develop natural gas for domestic use.
The gross domestic product was expected to register a small positive growth and the fiscal budget was set to record a SR7bn ($2.1bn) surplus. The Saudi stock market was up 126 per cent from the beginning of the year while world equity markets were in decline.
The terror attacks in the US, however, have changed the picture, political uncertainty and fears of a global recession sent oil prices down and undermined domestic confidence. The stock market-with more than $68bn capitalisation was dealt a blow with the Saudi index losing 10 per cent in the month after September 11. Most of the impact of the attacks will be felt next year with Saudi American Bank (Samba) now projecting a $10bn drop in oil revenues to also will hit Saudi high net worth individuals who have vast exposure to foreign stock markets. Samba now estimates growth will be around 1 per cent this year and the government budget will be balance. Next year, however, the GDP is expected to be flat and Saudi Arabia will again be faced with a budget deficit of about $5bn — a problem that dogged the kingdom throughout the 1990s but was reversed last year when oil prices shot up.
Saudi Arabia is still far from being able to join the World Trade Organization, despite official statements to the contrary. The government is committed to privatization, with the telecommunications company and the national airline being prepared for sale. Saudi Airlines, however, is a money loser that requires a massive restructuring before it can be offered for sale.
Still economists say that the pace of reform-particulars the gas initiative suggests that the pro perform group in the regime is making headway. “Reforms are doing well considering how great the obstacles are “say one economist. “The constituency for change rests with a few enlightened senior officials. The religious community is not supportive and businessmen are monopolistic and can fight change.”
The non-oil sector has witnessed continuous GDP growth in the past nine years, an average of 2 per cent in real terms. But the overall yearly average growth has been just 1.5 per cent since the 1980s — below population growth rates.
Qatar
Qatar’s energy-based economy has never looked as robust in the country’s 30-year history. Since 1995, the tiny Gulf Arab state has invested almost $30 billion in its oil and gas sectors, nearly half of it borrowed. Last year, the investments started to pay off. Exports of liquefied gas (LNG) soared from 3.6 million tonnes in 1998 to 6.4 million in 1999 to 10.5 million tons last year. Prices for natural gas more than tripled in the same period from less than $2 per million cu ft to more than $6.80.
Each 1 million tons of LNG production yields about $240 million to Qatar annually. Since 1995, oil production has risen 60 per cent to 720,000 barrel per day (b/d). Revenues have also soared on the back of prices which last year averaged $27 a barrel, nearly twice the figure on which the fiscal 2000/2001 (April to March) budget revenues were based.
Oman
In contrast to some of its neighbouring countries, Oman — a member of the Cooperation Council for the Arab States of the Gulf (GCC) — has limited crude oil resources that are projected to last less than 20 years based on current proven reserves and production levels. (Oman, together with Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, all oil-exporting countries, established the GCC in the early 1980s to foster close economic cooperation and regional integration). However, since the commercial development of oil began in the mid-1970s, Oman has used these limited resources — within a liberal trade and exchange system — to create a modern physical and social infrastructure.