Analysts have cut their economic growth forecasts for the Gulf Arab oil exporting states further despite a rebound in crude prices, because of the impact of governments' austerity policies, a Reuters poll found.
Brent crude oil has climbed to around $40 a barrel from about $30 since the last poll was conducted in early January.
But that will not boost growth in the short term because governments are continuing to impose new austerity measures to curb budget deficits caused by cheap oil.
Since January, Saudi Arabia, the United Arab Emirates and Oman have introduced fresh spending cuts or rises in taxes and fees; other countries are considering such steps.
"The Gulf is experiencing a slowdown for a couple of years while things steady in the oil market and the region digests low oil prices and fiscal reforms," said Elias Bikhazi, group chief economist at National Bank of Kuwait.
"The extent of the process varies a bit between countries, but it's a common theme."
The latest poll of 19 analysts found them cutting their median 2016 growth forecasts for five of the six Gulf Cooperation Council countries, with the exception of Kuwait. Forecasts for 2017 were cut for all six countries.
Saudi Arabia's gross domestic product is now expected to grow a median 1.5 percent this year, down from the previous estimate of 1.9 percent. Next year's outlook has been lowered to 1.9 percent from 2.2 percent.
The United Arab Emirates' economy is expected to grow 2.8 percent this year instead of 3.0 percent, while its 2017 forecast has been cut sharply to 2.9 percent from 3.4 percent.
All of the six GCC states are expected to avoid recessions by comfortable margins. Bikhazi said there were delays and cuts to government projects in the region, with the exception of Kuwait. But major projects are still going ahead, he added.
He also said that while cuts in energy subsidies were dampening consumer spending, the effect was still relatively limited. "These changes are gradual enough that while the impact is negative, the economies can handle it."
Nevertheless, the cost of keeping government spending high enough to avoid recession is expected to produce hefty budget deficits in all GCC states this year.
After running a whopping deficit of 15 percent of GDP last year, Saudi Arabia is projected to post a 15.5 percent deficit in 2016 with only a moderate improvement to a 9.7 percent gap in 2017, the poll showed.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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