Reforms and diversification are key to future growth in the Persian Gulf- IMF

FILE PHOTO: Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah
FILE PHOTO: Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah

DUBAI, Oct 31 (Reuters) – Gulf oil exporters are expected to save an average of 33% of their oil revenues in 2022-26, leading to an improvement in the global fiscal balance, the Monetary Fund said on Monday. International, which underlined the need to resist the temptation to return to a fiscal policy of procyclical spending.

Rising oil and gas prices are expected to increase the average current account surplus in the six Gulf Cooperation Council countries to 9.7% of GDP in 2022, up from 4.6% of GDP in the year past, which will mean an additional surplus of 275,000 million dollars, according to the IMF in its latest report.

“Many (Persian Gulf states) confirm that this time they will stick to their (fiscal discipline) plans… It remains to be seen if this is confirmed by facts. There are always temptations to be procyclical,” the director of the department told Reuters. of the Middle East and Central Asia of the IMF, Jihad Azour.

“Oil exporters must increase and strengthen their reserves and use this moment as a litmus test for sustainable diversification.”

Middle East oil exporters are expected to outperform their peers, with projected growth of 5.2% this year, following 4.5% growth in 2021, fueled by high oil prices and strong growth in the Non-oil GDP, which offset rising global interest rates and high food prices.

Growth is expected to moderate to 3.5% in 2023 as oil prices decline and global demand slows, the Fund added in its latest report.

For the main exporter, Saudi Arabia, the IMF forecasts growth of 7.6% this year, slightly below the government forecast of 8% and compared to 3.2% in 2021.

Growth in the kingdom’s oil sector is forecast to fall to 3.3% next year from 13.1% in 2022, while non-oil GDP is forecast to stand at 3.8% in 2023 vs. 4.2% this year.

“Our regulatory recommendations for Saudi Arabia, as well as other oil-exporting countries, are to stay on the path of reforms that help diversify the economy, improve productivity (and) avoid procyclical monetary policies,” Azour said.

The size of the non-oil sector has grown in Saudi Arabia, the United Arab Emirates and other Persian Gulf countries with the opening of new sectors that attract investment, while the financial sector is “well capitalized, profitable and strong,” Azour said.

Later, at a press conference on Monday, he said that the impact of the Persian Gulf central banks on the financial sector was “relatively limited”, as were the US Federal Reserve rate hikes, despite that inflation in the region is weaker than the global trend. Most of the Persian Gulf currencies are pegged to the US dollar.

“So far this impact has been limited and has been largely offset by…improved foreign exchange reserves…as well as improved fiscal positions, which will reduce the need for governments to borrow and to crowd out the private sector,” he said.

(Reporting by Rachna Uppal and Ghaida Ghantous; Editing in Spanish by Flora Gómez)

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