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The International Monetary Fund has slightly increased its forecast for global economic growth this year, predicting 3.9% growth for 2018, up 0.2% on its previous forecast issued last October. It follows a slightly better than expected performance for the world economy in 2017, which grew by 3.7% overall – that momentum is expected to carry into 2018 and 2019.Growth in the Middle East is expected to pick up in 2018 and 2019, with stronger oil prices helping a recovery in domestic demand in oil-exporting countries.

Saudi Arabia and the UAE went ahead with the introduction of a value-added tax (VAT) as planned on 1 January, with some teething problems quickly becoming evident. The other Gulf Co-operation Council (GCC) members have opted for a wait-and-see approach, although all are still signed up to the principal of introducing VAT eventually.The approaches vary between the two countries at the forefront of the new tax. In the UAE, private education has been given a 0% VAT rate, while in Saudi Arabia it merits a 5% levy.

Dubai Ruler Mohammed Bin Rashid Al-Maktoum has approved an expansionary budget for the commercial emirate in the coming year. The 2018 budget, signed into law on 10 December, includes spending commitments of Dh56.6bn ($15.4bn), a 19.5% rise on the current fiscal year. A large proportion of spending – at Dh11.9bn, or 21% of the total – is devoted to infrastructure spending as the emirate continues to prepare for Expo 2020 and to build out the Dubai Metro network.

Manama suffered another downgrade to its sovereign rating on 1 December, when Standard & Poor’s (S&P) lowered its rating from BB- to B+ on what it described as “extremely weak external liquidity”. The ratings agency said the islands’ gross external financing needs were among the highest across rated sovereigns.

The European Union has included Bahrain and the UAE in a list of 17 countries that fail to meet good governance standards on tax, in a move which could open them up to a range of sanctions. The naming and shaming of ‘non-co-operative tax jurisdictions’ on 5 December, following a meeting of EU finance ministers, is the first time that Brussels has published such a blacklist. Previously, individual EU member states maintained their own lists, with Bahrain and the UAE being the most widely cited, featuring on six lists each.

Politics: Sultan Qaboos Bin Said Al-Said is the 14th ruler of the Al-Busaidi dynasty (founded in 1750) and the monumental figure in modern Oman. Having deposed his father in 1970, Qaboos relies on allies typically drawn from the merchant elite, rather than his relatively small family. In a highly centralised power structure, Qaboos remains premier, defence, finance and foreign minister, Central Bank of Oman chair and armed forces commander-in-chief. He was briefly married but has no children or heir apparent.

The UAE cabinet approved the federal budget for the years 2018-21 on 7 November, in a meeting held on the sidelines of the Sharjah International Book Fair. The four-year budget includes a total of Dh201.1bn ($54.7bn) in spending, including an evenly matched Dh51.4bn in revenue and spending in 2018.

Standard & Poor’s lowered its long-term foreign and local currency sovereign credit ratings on Oman from BB+ to BB on 10 November, citing large fiscal and current account deficits. It said Oman’s overspend, which is mostly being financed through external borrowing, is eroding the sultanate’s net asset position. S&P expects Oman’s external debt to exceed its liquid external assets for the first time next year, with the gap widening in subsequent years.

One thing to be drawn from the slew of announcements from the Future Investment Initiative (FII) – the high-powered conference dubbed ‘Saudi Davos’ by local media, which was hosted by the Public Investment Fund (PIF) in Riyadh from 24-26 October – is that Saudi Arabia is clearly still a big draw for international business executives, even if the economy is in recession and struggling under an austerity-driven government spooked by low oil prices.

In the run-up to the latest effort to establish Saudi Arabia’s credentials as a forward-looking hub for investment, clouds are gathering over the recession-hit economy and the government’s commitment to reforms set out by Crown Prince Mohammed Bin Salman Bin Abdelziz (MBS) in his Vision 2030 strategy. The Future Investment Initiative conference, which is being staged by the Public Investment Fund in Riyadh on 24-26 October, comes at a time when strains on the local economy are showing up ever more clearly.

Coast Guard Commander Commodore Alaa Siyadi said on 18 September that three Bahraini boats with 16 fishermen on board had been detained by Qatari security forces in the previous three days. Such incidents have often occurred in Gulf waters, and Qatar tried to defuse the row, saying any fishermen entering its waters illegally were detained as a matter of course; they are generally released after a few days while their boats were impounded pending the outcome of court proceedings.

Concern over the sultanate’s current account and other balances are being reflected in an upturn in sovereign and corporate debt issuance. The most eye-catching deal of the Omani summer was a $3.6bn loan agreed by the government with a group of unnamed Chinese financial institutions. Finalised in July and unveiled in August, the five-year unsecured loan was only marketed to Chinese lenders; it is something of a departure for the sultanate, which has tended to rely on financial aid from rich regional allies such as Saudi Arabia, Kuwait and the UAE, or loans from western lenders.

The Al-Khalifa family came to power in 1783, driving the Persian empire from the archipelago. The British empire, interested in maritime trade routes, entered into an alliance with the Al-Khalifa 200 years ago; only in 1971 did Bahrain declare independence. The constitution provided for a fully elected parliament, which was formed in 1973 but disbanded in 1975 after a period of repressive rule; a partially elected body was reinstated in 2002.

Used to playing the neutral intermediary, positioning which has allowed it to avoid taking sides in previous disputes, Oman is somewhat isolated in the Qatar crisis, where Kuwait appears to be the chosen regional negotiating channel and the troika of Gulf Co-operation Council (GCC) states opposing Doha seems more insistent than before that those who are not with them are against them.

The economic implications of the dispute could be high for Qatar, although that depends on how long it lasts. Any sustained blockade of its border with Saudi Arabia or its shipping connections with the UAE will disrupt the construction programme for the 2022 World Cup and other infrastructure schemes. Food shortages, particularly during Ramadan, when people are prone to buying large quantities of food, could become an issue – most of Qatar’s food is imported via Saudi Arabia and other goods are often delivered via the UAE’s Jebel Ali port.