Fall in oil prices to wipe out Gulf’s current account surplus

The recent fall in oil prices, if sustained, will effectively wipe out the Gulf’s current account surplus. This shouldn’t pose too many problems for these economies. Even if oil prices fall further, large FX reserves could finance current account deficits for years to come. Accordingly, we don’t think that growth across the region is about to collapse. Moreover, the Gulf’s loss will be the rest of the world’s gain. Indeed, we estimate that a reduction in the transfer of income from oil consumers to the Gulf could boost aggregate global demand by around 0.2% of world GDP.