The International Monetary Fund has urged Persian Gulf Arab statess (Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman) to make greater progress toward more diversified, dynamic, private-sector driven economies as a new era of lower oil prices continues to impact economic growth.
Latest figures released by the IMF forecasts that the (Persian) Gulf Cooperation Council region’s non-oil growth will be 1.8% in 2016 and 3.1% in 2017, much lower than the 7% average between 2000 and 2014, Arabianbusiness reported.
It said the slowdown was due to the “dampening effect from fiscal consolidations and a broader weakening of private sector confidence in the face of lower oil prices”.
The IMF welcomed recently-announced diversification plans such as Saudi Arabia’s Vision 2030 which emphasizes private sector development, commits to a balanced budget in five years, and envisages a partial privatization of Aramco, the world’s largest oil and gas company.
Oil exporters and importers alike have started to rationalize government spending and have cut back on their expensive general subsidy programs, for petrol, electricity, gas, and water, which have tended to benefit mostly the rich.
Despite these improvements, prices for these utilities are still well below international standards, so policymakers could go further in reforming their energy pricing frameworks, the IMF said.
Some countries have also started to find cost savings in their public wage bills, it added.
Masood Ahmed, IMF Middle East and Central Asia Department director, said: “These are all welcome moves and underline how committed these countries are to adjusting to the current difficult economic environment.”
However, he added that over the next 12 months, and well into the future, more needs to be done.
Ahmed added: “The economic transformations that are made now will have the potential to provide resilient and inclusive growth for generations to come.
“For oil exporters, this will include relying less on oil revenues while creating job opportunities for new labor market entrants in the private, rather than public, sector, while for oil importers, this will mean relying less on remittances. But, for both these groups of countries the goal must be an economic model that depends less on state spending and more on the private sector.”
Regionally across the Middle East, North Africa, Afghanistan and Pakistan, the IMF said the slump in oil prices and ongoing conflicts continue to weigh on growth prospects.
