Gulf governments enjoy fiscal flexibility; must spend wisely over coming years

Al-Monitor Pro Members

Dr. Robert Mogielnicki

Senior Resident Scholar, Arab Gulf States Institute in Washington 

Jan. 27, 2023

The public sector revenues of governments in Gulf Cooperation Council (GCC) member states remain closely tied to proceeds from oil and gas exports. Elevated energy prices in 2022 permitted GCC states to begin 2023 in relatively strong fiscal positions. Short-term energy outlooks forecast lower oil and gas prices, but past fiscal reform progress will help reduce the negative impact on budgets. Regional governments must exercise smart spending to ensure momentum continues for their respective economic diversification efforts.  

• The US Energy Information Administration forecasts suggest that the spot price of Brent crude oil will average $83 per barrel in 2023 and $78 per barrel in 2024 — down from $101 per barrel in 2022. 
• GCC economies are expected to grow at half the rate of 2022, according to a median view from a Reuters poll of economists.  
• Saudi Arabia approved a $296.7 billion budget for 2023, up from $254.3 billion in 2022, following a $27 billion budget surplus last year. Much of this spending will be allocated toward Saudi Vision 2030 projects and related programs. The Saudi Ministry of Finance anticipates a smaller $4.3 billion surplus this year. 
• Qatar’s approved expenditures for the 2023 fiscal year will reach $54.6 billion, a small decrease of 2.6% over 2022, owing in large part to the completion of World Cup-related initiatives. The Qatari Minister of Finance said that public revenues, which he estimates will reach $62.6 billion and leave a $8 billion surplus, were based on an average oil price of $65 per barrel.  
• The Qatari budget has prioritized spending allocations for the health and educations sectors.  
• Oman’s 2023 state budget expenditures will reach an estimated $22.5 billion (51% for civil ministries, 35% for defense and security, and 14% for public debt service), while the government expects a $3.38 billion deficit, following a surplus of nearly $3 billion last year.  
• Fitch Ratings affirmed a Stable Outlook for Bahrain but projects the country’s deficit to widen to 4.1% of gross domestic product in 2023 from 3.6% in 2022. The Bahraini government previously adjusted plans to balance the budget from 2022 to 2024. 
• The UAE Cabinet approved the federal budget 2023-26 in October 2022, with a total estimated expenditure of $68.7 billion.  
• Emirate-level budgets, however, are more significant determinants of fiscal trends in the UAE. Dubai alone approved a 2023-25 budget allocating $55.8 billion in expenditures. In early January, Dubai announced an ambitious $8.7 trillion economic plan for the next decade. However, the financial position of oil-rich Abu Dhabi remains significantly stronger than that of the remaining emirates.  
• In November 2022, Kuwait’s National Assembly passed the state budget for the fiscal year that began in April. Estimated spending was $76 billion, with a minor deficit of around $400 million based on an oil price assumption of $80 per barrel.