The need to maintain high oil prices in order to balance
government budgets is one of the biggest long-term challenges facing the Gulf,
while Dubai’s nurturing of its non-oil service sector has put it in a strong
economic position going forward, panellists agreed at the Arabian Business Forum.
“The long-term challenge is going to be fiscal challenge.
The GCC seems to spending a lot so you hope the oil price will continue to
rise, this is not sustainable,” said Afshin Molavi, Senior Advisor at Oxford
“The breakeven price of oil (the price required to not run a budget deficit) has gone up dramatically from US$60 to US$120. In Bahrain some estimates
say they need US$120 on oil or they will run deficits... In Saudi we are looking
at US$90. Six or seven years down the road the fiscal challenge will be faced,”
Despite this growing challenge, Philippe
Dauba Pantanacce, Senior Economist for Turkey, Middle East and North Africa at
Standard Chartered said he believed the “GCC has a tremendous future”.
“It is a simple story. Hydrocarbons will keep growing. In
the current environment you will still have net growth from oil products.”
While Dauba Pantanacce warned that government spending
“is something that has to be watched”, he believed Dubai’s focus on the non-oil sector has put it in a solid economic position going forward.
“The non-oil economy has a great future, contrary what
people perceive in Europe… Dubai is ahead of the game as it has developed a
service industry. It will continue to be a core strength.”
Shane Phillips, managing director of Shane Phillips
Consultants, said a clear example of Dubai’s strength was its job
“Dubai ranks in the top ten for jobs growth per capita in
the world so it is one of the best cities to be in. In the GCC Qatar is leading
with 23 percent growth in online jobs, while the UAE is 16 percent,” he added.