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Riyadh has been gently criticised by the International Monetary Fund over its plan to deliver a balanced budget in the next few years, which the IMF believes could harm the economy’s growth prospects. The idea of a balanced budget by 2019 or 2020 forms the centrepiece of the government’s Fiscal Balance Programme, which is part of the wider Vision 2030 strategy drawn up by Deputy Crown Prince Mohammed Bin Salman (MBS) and his expensive array of international consultants.

The International Monetary Fund has forecast growth of just 1.3% this year as the UAE economy’s expected 3.3% expansion of non-oil GDP is offset by a 2.9% decline in oil GDP as a result of production cuts. The IMF expects the federal budget deficit to fall to 4.5% of GDP in 2017 and for economic growth to rise above 3% “over the medium term”.

The Gulf Co-operation Council (GCC) economies are expected to suffer a further slowdown this year, in large part due to the oil production cuts agreed through The Organisation of Petroleum Exporting Countries (Opec), but most of them will at least continue to grow according to the latest forecasts from the International Monetary Fund (IMF) published on 2 May. The Fund is predicting growth of just 0.9% this year across the six GCC states, compared to 3.8% in 2015 and 2% in 2016.

The cabinet approved draft laws on income tax and value-added tax (VAT) at a meeting on 3 May chaired by prime minister Sheikh Abdullah Bin Nasser Bin Khalifa Al-Thani. The new income tax law replaces existing statutes which provide an exemption for non-Qatari investors from tax on profits of some companies and investment funds. The VAT law is in line with the wider Gulf Co-operation Council plan to impose the sales tax from 2018.

The Dubai economy appears to be growing relatively strongly, according to the Dubai Economy Tracker Index produced by local bank Emirates NBD. The index rose to 57.7 in April from 56.6 in March, the fastest rate of growth since February 2015 (anything over 50 points signals an expanding economy). Activity in the construction, tourism and wholesale and retail trade sectors all picked up, but margins are being squeezed and jobs growth is sluggish.

Fitch Ratings has cut its sovereign credit rating, citing the kingdom’s “continued deterioration of public and external balance sheets, the significantly wider than expected fiscal deficit in 2016 and continued doubts about the extent to which the government’s ambitious reform programme can be implemented.” As Fitch points out, between June 2016 and January 2017, government deposits declined by SR242bn ($64.5bn) to SR841bn (35% of 2016 GDP), leaving them at around half their August 2014 peak of SR1.6trn. At the same time, general government debt has risen from 4% of GDP in 2015 to 9.7% now.

The Iraqi tax system’s complexities and inadequacies were subjected to the scrutiny of the UK courts in a judgement published on 17 February, which could result in the Egypt-based telecommunications group Global Telecom Holding (formerly Orascom) paying damages of $60m to Atheer Telecom Iraq, a subsidiary of Kuwait-based Zain Group. Atheer sued GTH subsidiary Orascom Telecom Iraq in the High Court of Justice in 2012, after receiving a multi-billion dinar tax bill from the Iraqi government following its purchase of the Iraqna mobile network from Orascom in 2007. The case was heard last November.

The government has set out spending plans of KD21.2bn ($70bn) for fiscal year 2017/18 and plans to bring in revenues of KD13.3bn, leaving a deficit of KD7.9bn according to the Finance Ministry. The budget is based on an average oil price of $45/bbl, with expected oil revenues of KD11.7bn, up 36% on 2016/17. The deficit is far higher than anticipated (Dubai-based Emirates NBD had estimated KD3bn). The government has also launched the New Kuwait long-term economic strategy, based around the pursuit of a diversified economy and high-quality infrastructure by 2035.

Most Gulf countries have improved their standings in the latest edition of the World Bank’s Doing Business report, which is often cited by analysts and government officials when assessing the competitiveness of an economy. The UAE was easily the highest ranked in the region, with a global ranking of 26 (out of 190 countries), up from 34 last year.Among the rest of the Gulf Co-operation Council (GCC), the next best was Bahrain (63, up from 66), Oman (66, up from 69), Qatar (83, down from 74), Saudi Arabia (94, up from 96) and Kuwait (102, down from 98).

International investors were awaiting the launch of Saudi Arabia’s first international bond as GSN went to press. With few details confirmed, analysts have been left to speculate about a potential meag-deal. Most expect it to be worth up to $15bn and to go ahead in early October, perhaps around the time of the International Monetary Fund (IMF)/World Bank annual meetings (7-9 October) in Washington DC. The interest rate on this debt is likely to be fairly low, possibly around 3.5%-3.75%.

Samsung Engineering and Alcoa Inc have reached a “settlement in principle” over a complaint the Korean firm filed in March against the aluminium producer, which sought $202m in damages, according to recent filings at the District Court for the Southern District of New York. The settlement, once finalised, will result in the dismissal of the action with prejudice (which means the case is over forever).

A 13 June cabinet meeting, chaired by King Salman, finally approved the Undeveloped Land Fees Regulation, a tax on undeveloped urban land, popularly known as ‘white land’. The 2.5% tax on the value of undeveloped land designated for residential or commercial use will be applied in stages to owners of plots bigger than 5,000m2. The Ministry of Housing will collect the levy and fine owners who don’t pay the tax. The long-awaited tax, intended to ease the severe shortage of housing by encouraging landowners to develop their assets, has been expected for some weeks.

Previous attempts at taxing the Saudi population have been derailed by local opposition. In 1950, the authorities introduced personal income, capital gains and corporate taxes on nationals and foreigners, but within six months the law was reformed to exclude Saudis. In 1975, income taxes on foreigners were suspended due to high oil revenues and the need to recruit expats to build infrastructure and develop the economy.

The World Bank has cut its projected growth rate for most Gulf economies in 2016-17, blaming low oil prices, cuts to government spending and ongoing conflict for holding back activity. Gulf Co-operation Council countries are now expected to grow by just 2% this year, compared to the 3% the World Bank predicted in January. Growth next year is forecast at 2.3%, compared to a previous estimate of 3.2%. Kuwait will be the slowest economy, with forecast growth of just 1.3% in 2016.

Gulf Co-operation Council leaders have committed to setting up a Commission of Economic and Developmental Affairs, “to enhance co-ordination… and accelerate the pace of joint action,” according to GCC secretary-general Abdul-Latif Bin Rashid Al-Zayani. The move was announced at the 16th GCC consultative meeting in Jeddah on 31 May. Saudi foreign minister Adel Bin Ahmed Al-Jubeir described it as a “quantum leap”.