temporary will be frustrated to learn it was not. Still, the deficit will widen. Contractors
will struggle with late payments for public-sector work. Yet the kingdom will plough
ahead with its biggest megaprojects, such as Neom, a $500bn high-tech city in the north-
western desert, and a planned Red Sea resort larger than some European countries. It
will also force more migrants out of the labour market, freeing up jobs, albeit low-
paying ones, for its citizens.
Meanwhile, a drive through Dubai at night will be eerie: towering apartment blocks and
opulent villas will sit dark and empty. The United Arab Emirates will lose about 1m
migrants, one-tenth of its population. Some will return home, having lost their jobs.
Others, having had their salaries cut, will send their families back and move into smaller
flats to cut costs. New construction will cause a further drop in property prices, which
fell by 10% in 2020. Dubai will at least get a delayed boost from the launch of the World
Expo in October 2021.
Kuwait will tap bond markets to plug a deficit that could run to 15% of GDP, saddling
future generations with more debt to pay for an outsized public sector. Bahrain and
Oman, already rated junk, will have a harder time borrowing. Outside the Gulf the
picture looks bleaker still. Iraq will cut spending to cover its bloated payroll. Algeria’s
foreign reserves, an impressive $200bn in 2014, will slide below $40bn.
There will be no relief in sight. Demand for oil will stay depressed. On the supply side,
OPEC+ members that adhered to strict production caps in 2020 will pump more in a bid
for market share. Joe Biden’s new Iran policy will send more crude trickling into the
market. Kings and ministers will finally realise that they need to restructure their
economies. They will also wonder if it is too late.
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