Gulf Countries Will Avoid Devaluations on Volatile Oil Price

The near-panic in oil markets last week and expectations of continued low crude prices are likely to spare key Gulf states’ balance sheets, regional analysts say.

While many of the Gulf Cooperation Council (GCC) countries’ currencies will avoid devaluations, however, the modest economic recovery of the last year is set to falter, with weaker growth expected in the next few quarters. The big question as to the market’s direction, meanwhile, depends in large part on the decision of OPEC and non-OPEC members on production cuts in the weeks ahead.

West Texas Intermediate graph

As prices hover around 2018 lows and struggle to stay above $60 a barrel, market watchers are reminded of the oil price collapse in 2014 that rocked the hydrocarbon-dependent economies of Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates. Both global benchmark Brent crude and U.S. West Texas Intermediate (WTI) are down more than 20 percent this month, and if monthly losses continue at the current pace, could see their biggest fall in more than ten years.

Brent crude graph

But according to Capital Economics, prices as low as $40 to $50 a barrel shouldn’t put major strains on the larger economies’ balance sheets as long as tight fiscal policy is maintained. The fiscal policy reforms of the last few years — subsidy and spending cuts and the introduction of new taxes — will continue but at a more subdued rate than when first implemented, preventing potential currency devaluations and protecting dollar pegs, the consultancy said in a research note published Monday. This means that current accounts in the major Gulf economies — the balance of imports and exports — are likely to stay in surplus.

via CBNC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza