The Middle East’s oil exporting economies are expected to shrink in 2015 as crude failing to recover from the price shock a year ago.

The biggest drops are tellingly in the region’s least diversified economies. Ratings agency Moody’s forecasts a 24 per cent drop in Kuwait’s nominal GDP and a 19 per cent contraction in Oman, with both the Saudi and Qatari economies expected to shrink by 14 per cent.

Oil price forecasts for 2016 have largely been slashed on slow global demand growth and continued increases in oil supply including from Saudi Arabia itself and the expected rise in Iranian exports.

Few analysts are predicting an average Brent crude price of over $60 a barrel in 2016 compared with the $55 a barrel we are on course for this year.

This leaves little scope for the economies of Middle East oil exporters to recovery next year, which will be a challenging time for government policymakers.

We have already seen Riyadh react by floating bonds in order to maintain its spending plans, with Saudi Arabia expected to record a fiscal deficit of 17 per cent of its GDP this year.

Further policy measures could include reforming the vast energy subsidies given to businesses and residents across the GCC, which enjoy some of the world’s cheapest fuel prices.

The UAE could turn out to be the leader on subsidy reform, having deregulated gasoline and diesel prices to levels now significantly above other GCC countries.

This will improve Abu Dhabi’s fiscal balance and could be emulated by other countries in the region looking to offset for fiscal shortfalls.