The high oil price and increased production will ensure continued healthy revenues in the oil-rich Gulf States. As a result, government spending is likely to increase further, which will ensure that the Gulf economies grow strongly in the near term. However, the nature of the spending commitments (public sector jobs, salaries and food subsidies) may limit the funds available for public investment. Alongside the lack of a political will to reform, this will constrain growth in the medium term. Meanwhile, the fall in tourism revenues and FDI inflows, and indeed the political uncertainty, in the resource-poor Arab countries will put a cap on growth in the near term. This will be made worse by the fact that the Gulf States are likely to shift their attention to their own problems.
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