Can the Gulf economies weather the slump in oil prices?

The latest slump in oil prices is unlikely to lead to major balance sheet strains in the largest Gulf economies and, even if prices fall further to $40-50pb, dollar pegs shouldn’t come under threat. But in the long run, this will only be sustainable if policy is kept tight and domestic demand stays subdued. This is a key reason why we think that the recent economic recovery will falter in the coming quarters and that growth will ultimately be weaker than most expect.