Crunch time for the Muscateers.

Crunch time for the six Muscateers Will it be one for all and all for one economic plan? Or will daggers be drawn in Oman at this year's GCC summit? Gulf leaders meeting in Muscat today will discuss how to use the money in their bulging treasure chests to shore up their countries' struggling economies in the face of the financial crisis. The GCC nations can afford to splash money around after crude oil prices hit record levels this year, and leaders will try to agree a joint approach when they assemble for their annual summit. "The oil countries of the Gulf will be able to cope with the crisis and to write off its impact on their economies for a year or a year and a half," said Kuwaiti expert Jassem Al-Saadoun, who heads the Al-Shall Economic Consultants think-tank. "They can finance their projected budget deficits in 2009 and probably 2010" thanks to their massive currency reserves, he added. However, the leaders attending the two-day meeting will be conscious of the impact on future revenues of the recent plunge in international oil prices to less than a third of their July peaks above $147 a barrel. Saadoun projects an average oil price between $40 and $50 next year, and between $50 and $70 in 2010. In addition, Gulf governments have seen the value of their international investments shrink sharply as stock markets have plummeted amid the credit crunch. But analysts and officials agree that Gulf countries have plenty of money left to inject into their domestic economies if they want. "The GCC has the resources to weather this crisis," its secretary general Abdul-Rahman al-Attiyah told Al-Hayat newspaper last week, noting that member states have built up sizeable reserves over the past five years. "Our leaders will discuss the question [of the financial crisis], aware they must agree on a joint approach on how to face it," Attiyah said. Henry Azzam, Deutsche Bank's chief executive for the Middle East and North Africa, estimates the GCC countries' sovereign funds have lost $450 billion in value, "equivalent to one year of oil revenues", since hitting $1.5 trillion in May. "The Gulf region has suffered from the global financial crisis and it won't come out of it until the world has overcome it," Azzam said on CNBC Arabia last week. The GCC states together sit on 25 per cent of the world's natural gas reserves and 45 per cent of global oil reserves, providing one quarter of the world's oil demands. The Institute of International Finance predicted in a study published this month that the average economic growth rate of GCC countries will shrink to 4.2 per cent next year from 5.7 per cent this year, hit by a tightening of bank loans and a reduction in oil production agreed by OPEC this month. Saudi Arabia, the world's top oil exporter, announced last week it is willing to chalk up a budget deficit of $17.3 billion next year by spending heavily to support the economy. After an unprecedented surplus of $160 billion this year, the country faces a sharp drop in revenues next year but it has decided not to cut back on major public projects. Instead, it will dip into funds estimated at $440 billion. Also on the agenda at the Muscat summit will be plans for a single currency - often touted as the 'khaliji'. GCC leaders are expected to approve the monetary union project and stick to the 2010 date they announced at last year's summit in Doha, Attiyah said. Host country Oman, however, has dropped out of the plan, while another obstacle is the issue of the currency peg. All GCC states peg their currencies to the dollar except Kuwait, which pegs to a basket of currencies dominated by the dollar. Attiyah also said last week he expected the Gulf to launch a common monetary council next year. The council would be the forerunner of a GCC central bank to operate independently of member states.

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