Gulf states prepare to weather economic storm after drop in oil prices

Saudi Arabia and Kuwait could cut back on spending as recession and slump in oil value hit hard

Saudi Arabia, the world’s leading oil producer and exporter, is expected to cut back on both current spending and adjust ambitious long-term development plans in the light of the slump in prices.

But cautious fiscal policies will place the kingdom in a relatively strong position, with the current budget based on a price of around $45-50 a barrel. Expansion next year will require around $55-62.


The worry must be that in a country with no elections, parliament, political parties – or taxes – the combination of slowing development projects and a widening gap between a fabulously wealthy elite and ordinary people struggling to make ends meet could be destabilising.

Publicly the message from the top has been that there is no need to panic: “Citizens should be sure that the country is moving calmly and all the coming days will be happiness and prosperity,” King Abdullah told his people last month even as falling prices of crude oil and the global financial crisis were becoming inextricably linked and starting to wreak havoc in the Gulf economies.

Guardian