Gulf states may post record fiscal surpluses this year after crude oil increased more than 90 percent in the past 12 months to $127 a barrel today. The six states in the Gulf Cooperation Council, or GCC, which include Saudi Arabia and the UAE, own about 40 per cent of the world's proven oil reserves.
''This provides the GCC countries with a huge safety net to continue to spend, even if oil prices weaken,'' said Monica Malik, chief economist at EFG, in the research note. ''We believe that as long as oil prices are between $55 and $60 per barrel the expansionary stance of the GCC countries will continue.''
Large budget surpluses make it difficult for Gulf states to curtail spending to help slow inflation, which has quickened to records across the region. Kuwait yesterday became the fourth Gulf states to report an inflation rate above 10 percent, while Qatar reported price-growth of 14.8 percent.
Spending will increase 28.9 percent in the U.A.E. this year, 25.6 per cent in Qatar and 7.1 percent in Saudi Arabia, the EFG report said.
The funds have invested at least $59 billion in the past year to shore up the balance sheets of Wall Street banks, including Citigroup Inc. and Merrill Lynch & Co., prompting calls from the U.S. Congress for more openness.
