Muscat – Despite numerous regional and global challenges in the past few years, the GCC region’s economy remains ‘a bright spot’ and the outlook is positive, according to the chief of International Monetary Fund (IMF).
Kristalina Georgieva, Managing Director of IMF, made the remarks as she participated in the joint annual meeting of the Financial and Economic Cooperation Committee and the Committee of Central Bank Governors of the GCC with the IMF.
“The GCC region remains a bright spot despite the numerous shocks over the past few years. Unemployment is low, inflation has been contained, exports from major ports have recovered quickly, and international flight arrivals have held steady. The outlook is positive.”
Kristalina noted that IMF now expects overall growth in the GCC to rebound in 2024, strengthening to close to 4% in 2025 as oil production cuts are gradually unwound.
She highlighted the fact that over the medium term, non-hydrocarbon activities in the GCC countries are set to remain strong, bolstered by ambitious reform efforts.
Despite this positive news, she warned of risks to the outlook. “Most notably, fluctuations in oil prices and production could reduce financial buffers and have negative spillovers on the non-oil economy. Regardless of what happens to oil prices, the strong reform momentum should be maintained, and even accelerated in some cases, while managing risks. The goal should be to achieve digital, green and inclusive growth.”
Kristalina said most GCC nations are undergoing fiscal consolidation but emphasised that more needs to be done to build sufficient savings for future generations.
“Tax reforms have started to bear fruit in some countries, but further progress is needed. For example, the global minimum tax initiative provides the GCC with an opportunity to implement broader corporate tax reforms.”
The IMF chief added that the ongoing rationalisation of public expenditures in GCC nations – including reductions in energy subsidies – is crucial. “This would not only aid fiscal consolidation efforts but also create space for targeted support to vulnerable populations. It could pave the way for priority public investments that align with the broader economic diversification agenda.”
Kristalina further noted that the impressive strides in structural reforms have significantly improved the business climate in the GCC region in recent years. “Four GCC countries are now among the top 30 most competitive economies in the world. However, progress on diversification needs to be accelerated, and the risks associated with some reforms must be properly managed.”
Additionally, she pointed out that digitalisation and AI could play a key role in the region’s economic diversification strategy. “The region is making substantial investments in AI technologies. However, it is crucial to be mindful of the risks that accompany AI and to manage them appropriately.”
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