Sharp rally in oil prices: Impact on regional economies and government spending plans

Sharp rally in oil prices: Impact on regional economies and government spending plans

Recovery in oil prices will certainly improve the economic outlook of the region and further support the government in gradually increasing spending plans

Pumpjacks are seen operating in Bakersfield, California. The price of Brent has averaged $114.5 per barrel since the start of March 2022 compared to average of $89.7 per barrel during the first two months of 2022. — AP file photo

By Shailesh Dash/Viewpoint Published: Sun 13 Mar 2022, 4:41 PM

The last 18 months have been dramatic for the global economies, and more so for the regional economies. From the outbreak of Covid-19 pandemic to historic low oil prices and then the sharp recovery in economic activity and oil prices. Although, there has been a complete turnaround of events, the region endured a challenging period during the first half of 2020. The regional governments must be commended with the kind of resilience and determination shown by the leaders in managing the double shock by taking appropriate measures and initiatives in navigating through the crisis.

The sharp rally in oil prices have positively benefited the government revenues and provided additional buffers in accelerating their ambitious diversification plans. According to the Institute of International Finance (IIF), the GCC’s hydrocarbon revenues are projected to