According to the most recent report issued by Deloitte, infrastructure investment in the GCC has remained high in the last three consecutive years and registered a record number in 2014 at US$171 billion.
There is a realization from governments of the dependence of their economies on public spending on projects and the necessity to maintain a certain level of spending and activity so as not to undermine future growth.
Equally there is an awareness of demographic pressure, giving rise to a growing need for infrastructure to be developed – involving power and water projects, roads, social housing, schools and hospitals – and the need for job creation for a young national labor force that is expected to drastically grow over the coming years. The announced budgets for 2016 outline cuts on spending posed by low oil prices, but in a measured way, as well as the introduction of new earnings sources.
Saudi Arabia is planning to reduce spending by 11% this year to US$227 billion. As part of its Vision 2030 plan, the country aims to increase overall non-oil government revenue from SR163 billion ($43.5 billion) to SR600 billion by 2020, and to SR1 trillion by 2030. Privatization of government services to encourage private sector investments – both local and international – in healthcare, housing, finance and energy sectors was announced as a key focus area for KSA. The country has gradually cut energy subsidies and increased energy prices to raise income as well.
The UAE, the most diversified economy among the Gulf countries, is set to register the first current account deficit in decades, and this is expected to widen to AED129 billion this year. The IMF has urged the Emirate to pursue growth-enhancing reforms and advance economic diversification. In 2015, fuel subsidies were eliminated, which has produced significant savings.
Qatar is intending to reduce its spending, prioritize projects and has also implemented subsidy reforms.
All GCC countries plan to introduce a value-added tax by 2018 to raise non-oil revenues, and are considering taxes that are even more unusual to the GCC, such as corporate and income taxes, which may become more real prospects.
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