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The UAE and Qatar are better-placed than other oil exporting Gulf countries to withstand a persistent oil price slump amid bleaker outlook with a projected 2016 breakeven prices - at which oil must sell in order to balance the budget - at $57 and $44 per barrel respectively.

ICAEW, a world leading body of chartered accountants, said given the weak outlook for oil prices - mainly driven by the uncertainty for the world economy in 2017 with US President-elect Trump as well as the economic slowdown in China - Brent crude is forecast to average $50.3per barrel in 2017 and remain below $60 per barrel until 2019. Analysts said even if Opec reaches an agreement in Vienna, as is widely expected, to cut production by as much as 1.4 million barrels a day, equivalent to about 1.5 per cent of global production for the first time in eight years, prices would not return close to the $100 per barrel averaged in 2010-2014.

fitch Ratings has forecast an oil price scenario of an average $45 per barrel in 2017 and $55 per barrel for 2018 for both Brent and WTI in the backdrop of high inventories and the potential for US shale production to respond quickly to any market tightening. While breakeven prices for Kuwait and Saudi Arabia are projected at $60 and $77 per barrel respectively, Oman and Bahrain will be under the greatest pressure with breakeven prices at $104 and $97 per barrel respectively, ICAEW said in its Economic Insight: Middle East Q4 2016 while urging GCC countries to substantially raise non-oil government revenues.

According to the report, the GDP in GCC+5 (Egypt, Iran, Iraq, Jordan and Lebanon) is expected to grow 2.6 per cent in 2016, improving very modestly to 2.7 per cent in 2017 due to weak oil prices and associated fiscal consolidation programs.

The UAE economy is expected to see GDP growth of 2.3 per cent in 2016, rising to 2.7 per cent in 2017 as both oil and non-oil sectors improve. Output in the oil and gas sector, which makes up around one third of the economy, is expected to rise by only one per cent in 2016 after growing five per cent last year. Non-oil growth is also expected to slow a little further this year to 2.9 per cent as the cumulative impact of low oil prices, tighter fiscal policy and liquidity feeds through.

Saudi Arabia's GDP is expected to rise 1.2 per cent in 2016 and a similar rate in 2017 while Bahrain's growth should hold up in 2016, unchanged from 2015 at 2.9 per cent. GDP growth in Oman is expected at 2.3 per cent in 2016, slowing further in 2017 to just 1.7 per cent. In Qatar, with government spending forecast to drop 10.2 per cent in 2016, non-oil GDP growth is expected to slow to 5.8 per cent this year, but pick up to 6.6 per cent in 2017. This will leave overall GDP growth at 2.6 per cent in 2016 and 3.7 per cent in 2017. In Kuwait, overall GDP is expected to grow by 2.8 per cent in 2016 and is expected to dip to 2.3 per cent in 2017, said the report produced by Oxford Economics, ICAEW's partner and economic forecaster.

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Publication:Pakistan & Gulf Economist
Geographic Code:7QATA
Date:Dec 18, 2016

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