The International Monetary Fund (IMF) on Tuesday (October 31st) advised energy-rich Gulf economies to speed up their diversification away from oil after projecting the worst growth for the region since the global financial crisis, AFP reported.
Oil exporters in the Middle East, especially those in the Gulf Co-operation Council (GCC), have been hit hard by the collapse in crude prices which provided a major part of their finances.
Following the slump, GCC members -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE -- undertook fiscal measures and reforms to cut public spending and boost non-oil revenues.
As a result, economic growth has slowed considerably as the GCC six and other regional oil exporters posted huge budget deficits.
In its Regional Economic Outlook, the IMF on Tuesday projected GCC economic growth at just 0.5% this year, the worst since the 0.3% growth in 2009 following the global financial crisis.
"It is the right time for GCC economies to accelerate their diversification outside oil and to promote a greater role for the private sector to lead growth and create additional jobs," said Jihad Azour, director of the Middle East and Central Asia at IMF.
"Preparing their economies to the post-oil era is something that is becoming a priority for authorities all over the GCC," Azour said.
"We are seeing governments developing diversification strategies and introducing a certain number of reforms to allow the economy to be prepared for the post-oil era. And those are important reforms," he said.
Azour said the IMF was projecting flat growth this year for Saudi Arabia, the largest economy in the region, but the non-oil sector was growing faster than expected.
This was an indication "that the Saudi economy is bottoming up and it shows that the gradual implementation of the fiscal adjustment now is going to allow the Saudi economy to grow faster," he said.
He estimated that Saudi Arabia and the UAE could achieve a fiscal balance by between 2020 and 2022.
