Thursday, May 31, 2012

Petrodollars: How to Spend it

The most effective policy tool to reduce oil exporters’ current-account surpluses is public spending, and investment in particular because of its high import content. Increased public spending could also help these economies diversify away from oil. That would support their future economic development and create more private-sector jobs for young, growing populations. To maintain social stability, many of these governments need to spend more on education, health care, housing and welfare benefits. Some oil producers, such as Russia and Nigeria, are running fairly balanced budgets, but the governments of the Gulf states are awash with cash. Since 2005 Saudi Arabia, Kuwait and the UAE have increased public spending by 7-8 percentage points of GDP. Even so, the three countries are expected to run an average budget surplus of over 15% this year. That leaves plenty of room to be a little more spendthrift.




http://www.economist.com/node/21553424



I am not sure I get the logic here. Unnfortunately the kind of spending that is taking place (on public sector wages) is unsustainable in the future.

1 comment:

.:: Sabbir ::. said...

Thank you bro so good post free apk