The storm created by low oil prices will finally make its presence felt in the Gulf this year and we expect this to be the start of an extended period of slow growth. A wave of devaluations is highly unlikely and, although the Gulf countries have agreed to freeze oil output, we don’t envisage production cuts to boost oil prices. Instead, tighter fiscal policy will be relied upon to make the adjustment to cheap oil. Strong balance sheets mean this process can be staggered over many years and thus growth will stay subdued for the foreseeable future. Indeed, we think growth will slow sharply in 2016 and weaken further in 2017, whereas most analysts expect a rebound next year. Qatar and the UAE are likely to the best performers, but Oman and Bahrain will be laggards.
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