The economies of the Arabian Gulf are set to benefit from a massive increase in public spending over the next three years before hitting a "revenue ceiling", an influential conference in Abu Dhabi heard yesterday.
Simon Williams, the chief economist at HSBC for the Middle East, warned delegates that although public spending in the UAE, Qatar, Bahrain and Saudi Arabia had trebled over the past five or six years, budget deficits would start to re-emerge in the region over the next two or three years.
Mr Williams said that by 2015 or 2016 growth would start to slow unless the private sector could take up the economic strain - something he considered unlikely.
He made his remarks at a conference hosted by the Higher Colleges of Technology (HCT) alongside the Philadelphia-based Global Interdependence Centre and the Wharton Centre, as part of HCT's Festival of Thinkers series,
"For the oil states this is a magnificent time. I hope all of you are enjoying it and making money out of it because it doesn't get much better. We are passing through a phase of super-abundance and a period of time when governments can spend aggressively and continue to add to their stocks of savings," Mr Williams told delegates.
"Those rising levels of public spending are part of a finite economic cycle that will come to a close when spending comes up against that revenue ceiling," he added. "When it does, growth will slow unless there is a private sector ready to come in and take up the strain."
lbarnard@thenational.ae