Are the resplendent days of the Gulf emirates coming to an end? According to international credit rating agencies and investment banks, the answer is yes. Standard & Poor’s has lowered Saudi Arabia’s credit rating twice in the last five months, and credit ratings for Bahrain and Oman are not any better. In November, Christine Lagarde, managing director of the International Monetary Fund, estimated that Gulf Cooperation Council (GCC) states' export revenues for 2015 would be $275 billion less than for the preceding year due to low oil prices.
The Gulf emirates, which spent lavishly to appease their populations after the start of the Arab Spring, have been badly shaken by the decline in oil prices from $110 a barrel to $30 a barrel in the last year and a half. Gulf leaders first dipped into their central bank reserves to cover budget deficits resulting from their extravagant social assistance expenditures. When that wasn’t enough, they began selling off assets held by their national asset funds. According to the Kuwait Financial Center, the Gulf states ended 2015 with a deficit of $160 billion. This year’s deficit is forecast to be $159 billion.