IMF Expects 6.5 Percent GDP Growth for GCC Countries

The International Monetary Fund calls on the Gulf countries to maintain financial policies that ensure sustainability and increase savings (AFP)
The International Monetary Fund calls on the Gulf countries to maintain financial policies that ensure sustainability and increase savings (AFP)
TT
20

IMF Expects 6.5 Percent GDP Growth for GCC Countries

The International Monetary Fund calls on the Gulf countries to maintain financial policies that ensure sustainability and increase savings (AFP)
The International Monetary Fund calls on the Gulf countries to maintain financial policies that ensure sustainability and increase savings (AFP)

GDP growth in the Gulf Cooperation Council (GCC) is expected to double this year, reaching 6.5 percent, a report issued by the International Monetary Fund (IMF) revealed.

Surging commodity prices have limited the spillovers from the war in Ukraine and the impact from tighter global financial conditions, and have allowed for a more positive outlook for GCC economies, according to IMF.

“Our analysis suggests that GCC countries will save far more resources than during previous episodes because of the fiscal and structural reforms taken in the region. In 2022 alone, the overall fiscal surplus will amount to over $100 billion, as the rise in expenditures—particularly on wages—remains contained so far,” the fund said.

“While GCC countries have benefited from higher, albeit volatile, oil and gas prices, numerous risks still cloud the outlook—notably a slowdown in the global economy. In this context, the reform momentum established in previous years should be maintained,” it added.

The report recommended implementing a comprehensive package of policies in order to respond to near-term shocks and firmly address the medium-and long-term challenges.

These policies include, “using additional revenues from higher oil prices to rebuild buffers and strengthen policy space.”

“Given the available fiscal space, targeted support for the most vulnerable can be prioritized, leveraging the progress made on digitalization.”

It also called for “keeping medium-term fiscal policy geared towards ensuring fiscal sustainability and increasing savings, through a credible fiscal framework.”

“Over the long term, this is critical to ensure equity between generations and a smooth energy transition out of fossil fuels. This can be supported through non-oil revenue mobilization and energy subsidy phase-out, which will also contribute to climate change mitigation.”

Other supporting measures include “the gradual reduction of public sector wage bills and increasing spending efficiency - for example, through continuing reforms to improve procurement and investment planning.”

The fund also said that “a proper assessment of the fiscal stance will require fully incorporating GCC sovereign wealth funds’ operations, given their role in diversifying savings from oil revenues and their involvement in national development strategies.”

The report demanded “maintaining financial sector stability, which is essential to sustaining strong economic growth.”

“As a result of high oil prices and abundant liquidity, which are facilitating credit expansion, GCC bank balance sheets are currently shielded from tighter global financial conditions. However, bank soundness should continue to be carefully monitored.”

The IMF concluded that “accelerating ongoing structural reforms, including by raising female labor force participation, increasing flexibility for expatriate workers, improving education quality, further leveraging technology and digitization, enhancing regulatory frameworks, strengthening institutions and governance, and deepening regional integration.”

“Implementing policies for sustained private sector-led economic growth and diversification will be as key as ever.”



Oil Falls on Signs of Progress in US-Iran Talks amid More Market Stress

The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
TT
20

Oil Falls on Signs of Progress in US-Iran Talks amid More Market Stress

The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo
The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, US, November 22, 2019. REUTERS/Angus Mordant/File Photo

Oil prices fell more than 2% on Monday on signs of progress in talks between the US and Iran while investors remained concerned about economic headwinds from tariffs which could curb demand for fuel.

Brent crude futures slipped $1.51, or 2.2%, to $66.45 a barrel by 1115 GMT after closing up 3.2% on Thursday. US West Texas Intermediate crude was at $63.11 a barrel, down $1.57, or 2.4%, after settling up 3.54% in the previous session. Thursday was the last settlement day last week because of the Good Friday holiday, Reuters reported.

"The US-Iran talks seem relatively positive, which allows for people to start thinking about the possibility of a solution," said Harry Tchilinguirian, group head of research at Onyx Capital Group. "The immediate implication would be that Iranian crude would not be off the market."

Markets also have lower liquidity due to the Easter holiday, which can exacerbate price moves, he added. In the talks, the US and Iran agreed to begin drawing up a framework for a potential nuclear deal, Iran's foreign minister said, after discussions that a US official described as yielding "very good progress." The progress follows further sanctions by the US last week against a Chinese independent oil refinery that it alleges processed Iranian crude, ramping up pressure on Tehran.

Markets also came under stress on Monday, after US President Donald Trump last week made criticisms about the Federal Reserve. Gold prices rose to another record, with jitters rippling into energy markets due to concerns about demand, according to analysts.

"The broader trend remains tilted to the downside, as investors may struggle to find conviction in an improving supply-demand outlook, especially amid the drag from tariffs on global growth and rising supplies from OPEC+," said IG Market Strategist Yeap Jun Rong. OPEC+, the group of major producers including the Organization of the Petroleum Exporting Countries and allies such as Russia, is still expected to increase output by 411,000 barrels per day starting in May, though some of that increase may be offset by cuts from countries that have been exceeding their quotas. A Reuters poll on April 17 showed investors believe the tariff policy will trigger a significant slowdown in the US economy this year and next, with the median probability of recession in the next 12 months approaching 50%. The US is the world's biggest oil consumer.

Investors are watching for several US data releases this week, including April flash manufacturing and services PMI, for direction on the economy.

"This week's series of PMI releases could further underscore the economic impact of tariffs, with both manufacturing and services conditions across major economies expected to soften," IG's Yeap said, adding oil prices face resistance at the $70 level.