The International Monetary Fund forecast Gulf countries to grow 3.5 per cent this year, according to Masood Ahmed, director of the IMF’s Middle East and Central Asia Department.
Masood Ahmed said in an interview with Al Arabiya on Wednesday that oil-producing countries will face challenges in spending because of oil price fluctuations.
However, the international official praised the Gulf states’ steps in establishing huge reserves that enabled them to face the plunging oil prices.
He added that resorting to reserves by these countries boosted its growth to hit last year’s growth rates. He praised this step, considering it an economic success for Gulf states.
At the same time, he called on Gulf states to reconsider energy subsidies and urged them to take action in order to reduce the high consumption.
He says, “There are countries that have already begun to reduce the subsidies and were able to adapt to the severe economic fluctuations experienced by the markets.”
A report issued recently by the IMF forecast a modest recovery to continue in the MENA, Afghanistan and Pakistan regions.
The IMF noted in its report that the sharp increase in spending has raised the vulnerability of Gulf budgets to falling prices.
The report points out that countries in the region cannot achieve a balance in their budgets if the price per barrel approaches $60.
In the report, the IMF states that it believes that the financial surpluses of the budgets of the Gulf, which amounted to more than $77 billion in 2014, may turn to a deficit exceeding $114bn, or 7 per cent of GDP during the current year.
The IMF’s forecasts came in spite of falling oil prices, the intensification of regional conflicts and the remaining uncertainties about the transformations that followed the Arab Spring.
While most of these countries are facing big losses in oil revenues, they are expected to use the accumulated financial reserves and resources available to alleviate the decline in revenue growth.
This is while working to slow the spending of public finances gradually, in order to be able to share oil wealth that fell on the basis of equality with future generations and the rebuilding of preventive reserves that contribute to adapt to the volatility of oil prices.