Saudi’s oil policy shift and what it means for the Gulf

The sharp fall in oil prices today will push current account and budget positions into deficit across the Gulf, but these can be financed from large savings for some time. Dollar pegs should stay intact and the Gulf won’t backtrack on plans to raise output. That said, fiscal austerity is likely to be stepped up, and growth in non-oil sectors will be weaker than we had previously thought both this year and next.