The recent rally in oil prices has led governments in the Gulf to move away from the harsh austerity of recent years. Earlier this month, Saudi Arabia announced a raft of bonuses for public sector workers, while Bahrain’s government has put any further austerity measures on hold. To a degree, this is justified. After all, if prices remain at their current level of $70pb throughout this year, we estimate that this will provide a $100bn, equivalent to 5.0% of GDP, fillip to the GCC’s oil export revenues and a 4.5% of GDP boost to budget revenues compared with 2017. As a result, budget and current account shortfalls will narrow – most countries would return to posting twin surpluses. Even if oil prices fall back, as we expect, balance sheets will still be stronger than they were last year. Higher oil prices aren’t good news for all of the Middle East and North Africa though. In particular, fragile balance of payments positions in the region’s oil-importing economies will come under renewed pressure. Tunisia is one of the most vulnerable economies on this front and these pressures come at the same time that the country is facing a renewed bout of social unrest.
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