Awaiting the Gulf region’s budgets and forecasts

Lo’ai Bataineh –
L.Bataineh@u-capital.net –

We are still awaiting the Gulf Cooperation Council (GCC) countries to release 2017 budgets that reflect their projects, policies and financial plans amid the continued increase in deficits, debts and challenges.
These countries seek to push their economies to acceptable and secured levels, especially when oil prices keep unchanged or move down. They also face the difficulty of mapping out plans and programmes that would affect the daily life of peoples.
However, some GCC countries took several procedures that may bolster their financial resources and limit the investment and non-capital expenditures. The budgets may not reflect the financial and economic figures we heard and read.
However, some budgets may mirror a bright picture of economies as these countries can tap the financial and economic conditions through setting some regulations and instructions on imposing new taxes and fees and mapping out new economic and financial policies.
The government should adopt brave financial and economic policies amid the current major challenges that would weigh on the lifestyle of peoples in 2017.
The financial figures and indicators of budgets may reflect the challenges and pressures suffered by the Ministry of Finance and other ministries such as the continued financing of investment projects and capital spending.
I believe that they underwent the censor’s scissors in terms of delaying some under-construction projects and rescheduling the payments to cope with the financial and cash flow, which would put pressure on a significant number of major joint-stock companies. Accordingly, these companies ask banks to roll over their loans and financial liabilities.
The economic slowdown we witnessed in 2016 was due to the region’s tough political and military conditions that increased the political and financial risks. Therefore, several rating agencies cut the creditworthiness ratings of the countries, their banks and major companies, which led to an increase in the cost of finance and loan rescheduling due to the high financial risks in some countries. The GDP of some GCC countries is expected to rise nearly 3per cent at fixed prices, and the unemployment rates are likely to exceed 2010 levels, according to reports.
As for foreign trade, exports are projected to decline in 2016 as a result of weak oil and gas exports and continued fall in export prices.
On the other hand, imports may grow slightly, and would then rise but at lower levels compared to the previous years due to economic slowdown and decline in the projects awarded by the public or private sector amid investor anticipation and worries.
Most countries face difficult financial conditions and weak spending amid the continuity of budget surplus, but this surplus would fall gradually.
The new economic policies will boost the private sector and support the national exports.
Several financial and economic indicators show that the public finance of the GCC countries is expected to see unprecedented growth especially after increasing fees and taxes and imposing new fees and taxes, which would increase 2017 public revenues. In mid-2016, income taxes were imposed on companies, oil derivative prices were decontrolled and the tariffs of electricity and water were increased. The public spending would rise slightly when excluding the expenditures on the under-construction projects. Some countries may also witness a gradual decline in the employment rates compared to 2016 due to the significant rise in the current spending. The budget deficit of some countries would also rise to reach dangerous levels, especially when they exceed the budget deficit or dominate a large portion of the GDP.
The International Monetary Fund warned that the debts should not exceed 40 per cent of the GDP of non-industrial and developing countries, and the deficit should not surpass 14 per cent.
Finally, we can say that the reduction of the current expenditures and rationalization of spending may be one of the economic policies.
However, it may be a double-edged sword amid the continued economic slowdown, weak growth levels and high geopolitical risks unless some economic reform procedures are taken to boost investments and open markets in away fulfilling the conditions of stock exchanges.
The governments should also develop programmes to boost the capital and operational expenditure efficiency, and priority should be given to development and service projects that serve the different sectors.

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