The surplus of Arab Gulf states may turn into a deficit in 2017 if they continue with their spending plans, the International Monetary Fund (IMF) said in a report on Monday.
“Along with continued increases in government spending, fiscal and external surpluses are, with unchanged policies, projected to decline in 2013 and beyond, with the combined fiscal surplus turning to deficit around 2017,” stated the report.
The IMF’s findings hailed the Gulf countries’ expansionary fiscal policies which helped the region to withstand the global financial crisis but said the need for continued fiscal stimulus was diminished.
While the Gulf States enjoyed high oil prices, the black gold’s production and income are expected to fall slightly this year.
“Based on future prices, the latest projection in the World Economic Outlook has crude prices declining gradually over the medium term, falling below $100 per barrel in 2015,” it said.
The rapid deterioration in the global economy could bring about developments similar to what the region experienced in 2009, including a sharp fall in oil prices and disruptions to capital flows, it warned, adding that even in the worst case scenario of a deteriorating world economy, most of the Gulf Cooperation Council (GCC) countries have sufficient savings to cushion even a sizeable shock.
The GDP growth from oil will slow to 4.8 percent from 7.9 per cent last year, while non-oil GDP expansion will slip to 6 percent this year from 7 percent in 2011 as government spending falls, the IMF reported.
The report also recommended Gulf governments to help diversify access to funding by developing domestic debt markets to make up for tightened liquidity by European banks to the GCC.
According to the report, funds provided to global banks by the GCC amounted to $462 billion in January-March.
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