Economic growth in the Gulf region will recover in 2018 from a contraction last year but remains vulnerable to volatility in crude oil prices, the IMF said on Tuesday (November 13th).
The global lender predicted that an overall energy price recovery from 2015-2016 lows would spur the economies of the six-nation Gulf Co-operation Council to grow by 2.4% in 2018 and 3% in 2019, after a contraction of 0.4% last year.
Grouping Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, the GCC states together pump over 17 million barrels per day and depend heavily on crude revenues.
But "the growth outlook for oil exporters remains subject to significant uncertainty about the future path of oil prices", the IMF said in its Regional Economic Outlook for the Middle East and North Africa (MENA).
After their earlier extended recovery, oil prices have shed a fifth of their value in just one month, with Brent crude trading Tuesday at under $70 a barrel for the first time since April.
The IMF's director for the Middle East and Central Asia, Jihad Azour, said the decline in oil prices will not impact the lender's forecasts because they were based on prices of around $70 a barrel.
"It is clear that oil prices are volatile and becoming more so recently," said Azour, who urged GCC states to consolidate their economic stability.
Oil prices are forecast to further decline to around $60 a barrel, he added.
Azour said that while GCC states have made some progress in economic reforms and the introduction of value-added tax by Saudi Arabia and the UAE, they still need to do more.
They have to rationalise spending, reduce current expenditures used mainly for salaries and defence, redirect subsidies to serve the needy only and raise spending on the infrastructure and education, he said.
The IMF called on GCC states, which are among the few countries with no taxation regimes, to impose corporate and personal income tax in order to diversify their revenue sources.
