The IMF said Gulf Cooperation Council (GCC) countries need to step up crucial reforms in order to cope with low oil prices and slower regional economic growth, both of which are predicted for the foreseeable future.
The oil-producing GCC members have seen a sharp slowdown in their economic growth in the past two years, both from the oil price slump itself as well as from the subsequent government budget-cutting that was needed to fill the fiscal hole left by lower oil revenue.
As the IMF said last month, the GCC oil producers are now seeing the economic brakes pumped again this year because of lower oil export volume as a result of the output-cutting deal they struck in December to mitigate the world oil glut.
The oil exporters of the GCC are forecast to see real GDP growth this year of just 0.9 per cent, down from 2 per cent last year and 3.8 per cent the year before, according to the IMF.
The good news is that the group’s non-oil GDP growth this year will improve – to 3 per cent from 1.9 per cent last year – helped by an expected pick up in the world economy and an easing of regional governments’ cost-cutting policies.
But there are growing medium-term risks, according to Jihad Azour, the IMF’s director for the Middle East, North Africa and Pakistan (Menap).
“Yes, the outlook is improving but also the risks are growing,” said Mr Azour, who is in Dubai to discuss the IMF’s economic report on the region.
It is a familiar menu of recommendations from the IMF, but the urgency is growing because of building economic pressures and the political difficulty of delivering on some of the reforms, especially labour market and subsidy changes.
The GCC’s relative economic laggardness – world growth is forecast to pick up to 3.5 per cent this year and 3.6 per cent next year from 3.1 per cent last year – comes at a time when there is a growing need for jobs in the region, while the ability of the public sector to provide the bulk of employment for the indigenous population is being constrained by lower oil revenues.
“Since public sector employment growth will be much more limited in the future, new private sector jobs will be needed for the 6.5 million labour force entrants expected by 2022 in Algeria, Iran, and the GCC,” the IMF said. (Source credit – The National)