| 06 Jan 2009 |
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UAE: Oil prices may lead to deficit
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The UAE may post a fiscal deficit this year following a slump in oil prices, Standard Chartered Bank has said.
"Even with the UAE forecasting a balanced budget, we are more likely to see expenditures overshooting and a fiscal deficit," Mary Nicola, economist at Standard Chartered in Dubai said in a report.
The price of oil, which accounts for between 50 and 60 per cent of government revenue, has plummeted 68 per cent from its July high.
The drop in energy prices is hitting the whole region, with Saudi Arabia forecasting a fiscal deficit of 65 billion riyals ($17 billion) for the year.
"Policy needs to be countercyclical and government spending needs to increase to pick up the slack in the economy," Nicola said. "Running a fiscal deficit in 2009 is both justified and appropriate."
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