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

_IMF News, November 8, 2015_

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## Bibliographic details
- Published: November 8, 2015

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### Meeting context and purpose
- 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.

### Fiscal and macroeconomic impact of lower oil prices
- 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).

### Fiscal adjustment recommendations
- 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.

### Financial sector resilience and risks
- 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.

### Labor market and growth rebalancing
- 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.

### IMF engagement and closing remarks
- 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.*

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## References

- [Qatar and the IMF](http://www.imf.org/external/country/QAT/index.htm)
- [Kingdom of Bahrain and the IMF](http://www.imf.org/external/country/BHR/index.htm)
- [Kuwait and the IMF](http://www.imf.org/external/country/KWT/index.htm)
- [Oman and the IMF](http://www.imf.org/external/country/OMN/index.htm)
- [Saudi Arabia and the IMF](http://www.imf.org/external/country/SAU/index.htm)
- [United Arab Emirates and the IMF](http://www.imf.org/external/country/ARE/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15502_