Oil prices hit their highest level in more than two years this week and, combined with higher oil output over the rest of this year, will help to rein in large twin budget and current account deficits in the Gulf. This opens the door for policymakers to loosen fiscal policy but if, as we expect, prices drop back by next year, there’s only a short space of time to do so. Meanwhile, several governments in the region have relaxed travel restrictions to try to spur a recovery in tourism sectors, but these steps will have little effect if other countries do not reciprocate (which seems unlikely).
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