Saudi Arabia and other Gulf oil producers will almost certainly run budget deficits next year as they take a double hit from the collapse in oil prices and deep crude output cuts, economists said on Thursday. Still, huge surpluses amassed during a six-year boom when oil prices rallied as much as seven-fold compared with 2002 levels will allow the biggest oil-exporting region to keep on spending to sustain local economies during a global recession. “If oil averages $45 a barrel next year, then I expect to see significant budget deficits in Bahrain, Oman and Saudi Arabia,” said Simon Williams, senior economist at HSBC in Dubai. “We need to keep the shortfalls in perspective, however. Next year's deficits won't even begin to approach the value of the surpluses generated over the past five years.” The Gulf posted record fiscal surpluses this year. Gulf Arab states have expanded their budgets swiftly since 2002, striving to capitalize on soaring oil to diversify their economies away from gas and oil revenues. Governments poured billions into developing financial hubs, setting up tourism hot spots, building up industry and petrochemicals and speeding up construction projects. Oil export revenues for Saudi Arabia are expected to decline by more than 40 percent for 2009 on declining prices and lower production, banking officials said. A report by the Saudi Jadwa Investment said oil production could fall 8.7 percent to 8.4 million barrels per day for 2008. Meanwhile, lower crude oil prices and production could push export revenue from around $293 billion to $172 billion for 2009. Real economic growth for Saudi Arabia will shrink to 1.5 percent for 2009, its lowest rate in nearly a decade. The forecasts come as OPEC on Wednesday announced it would cut production quotas by 2 million barrels per day beginning in January.
