Press Release: IMF Managing Director Christine Lagarde Discusses Economic Challenges with GCC Countries

IMF News, November 8, 2015

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Statement issued at the conclusion of a meeting in Qatar with the finance ministers and central bank governors of the Gulf Cooperation Council (GCC).
Meeting served as a platform to exchange views on the challenges facing the global economy and the GCC region, and the policy responses needed.

A large share of fiscal and export revenues in the GCC come from oil; oil prices declined sharply since mid-2014.
Export revenues are expected to be nearly $275 billion lower in 2015 than in 2014.
The fiscal and current account balances in the region are deteriorating sharply.
Fiscal balance projected by the IMF to be in a deficit of 12.7 percent of GDP in 2015.
Growth expectations:
- 3.2 percent in 2015 (IMF projection).
- 2.7 percent in 2016 (IMF projection).
- 3.4 percent in 2014 (comparative reference).

GCC countries need to undertake some degree of fiscal adjustment; the size and urgency varies across countries.
Well-planned fiscal consolidation strategies should be put in place as soon as possible and communicated clearly.
Main common policy elements recommended:
- Expansion of non-oil tax revenues.
- Raising energy prices which are still well below international norms.
- Firm control of current spending, particularly on public sector wages.
- Review of capital expenditures.
Recommendation to strengthen fiscal frameworks to support consolidation efforts.

Banking systems in the GCC generally appear well-placed to weather lower oil prices, weaker growth, and higher U.S. interest rates.
Risks as oil revenues decrease and external financing conditions tighten:
- Government debt issuance increases.
- Potential stresses in the financial system.
Central banks should remain vigilant and provide liquidity to the financial sector if needed.
Macroprudential policy can help manage systemic stresses if they emerge.

Need to switch growth focus from the public sector toward the private sector.
Labor force dynamics:
- Some 2 million people likely to enter the labor force in the GCC by 2020.
Fiscal constraints limit further increases in government employment; private sector job creation needs to be stepped up.
Governments are implementing policies to encourage nationals to seek employment in the private sector and for firms to hire them; continued efforts are needed.

The IMF will continue to deepen its relationship with the GCC through regular country visits, technical assistance, and training.
The IMF stands ready to support the GCC countries as they address the challenges of lower oil prices.
Acknowledgments:
- Thanks to H.E. Mr. Al-Emadi, Minister of Finance for Qatar, for chairing the GCC meeting and for his government’s generous hospitality.
- Thanks to Dr. Abdul Latif bin Rashid Al-Zayani, the GCC Secretary General.

Source: Press Release No. 15/502, November 8, 2015, IMF Communications Department.