Ziad Makhzoumi, chief financial officer of Arabtec, the UAE's biggest construction firm by stock market value, thinks the region's economy will probably ride out weak oil prices comfortably. But he sees a risk. If oil drops below the price at which energy-exporting countries in the Gulf can balance their state budgets “ a scenario which he thinks unlikely “ infrastructure and other building projects will slow down or in some cases halt.
Fortunately, governments are more prudent and forecast better now than they did many decades ago, and can juggle things to maximise the use of limited funds or make their cash go longer, Makhzoumi told Reuters.
Across the Middle East, executives like Makhzoumi are wrestling with the implications of the plunge in oil prices over the last several weeks. If the lower prices are sustained, or if oil falls further, it could be the most significant event for some economies since last year's Arab Spring uprisings.
Cheaper oil may boost growth in some of the weakest states while cooling it in the booming Gulf energy exporters. There could be political as well as economic implications: some nations engulfed by the Arab Spring, such as Egypt, may find it easier to regain social stability. It may become harder for Iran to defy international sanctions designed to curb its disputed nuclear programme. Overall, said Liz Martins, senior economist for the Middle East and North Africa at HSBC in Dubai, the oil price drop could be good for the region, by bringing the cost of oil down to a level which is more sustainable for everyone in the long term. After averaging nearly $120 in the first quarter of this year, Brent crude oil has slipped as low as $95 a barrel this month “ the lowest level since January 2011.
