Forecasts higher than many other estimates
The International Monetary Fund (IMF) has raised its forecast for growth in the GCC in 2011 to 7.8 per cent, up from the 5.9 per cent it forecast in October 2010.
The increase in the forecast is mainly due to higher oil prices.The political unrest in the wider region is not expected to weigh in on growth in the GCC.
“For oil exporters in the region their fiscal position is improving everyday. So far they have seen limited impact from social unrest and responded to the unrest in the region with substantial fiscal packages,” says Masood Ahmed, director of the Middle East and Central Asia department at the IMF.
“Despite the increases in spending announced their fiscal position is actually getting better.”
Growth in the Middle East and North Africa (Mena) region is predicted to hit 4.1 per cent in 2011.
However, many of the forecasts are higher than estimates of 2011 growth by other economists. The IMF is predicting growth in Saudi Arabia of 7.5 per cent, above most other economists who put it more in the region of 4-5 per cent.
They are also predicting Bahrain growth of 3.1 per cent, above other estimates that are between zero and 1 per cent.
He also called on the governments of the region to look at their subsidies programme, which he said costs the region more than $200bn, or 8 per cent of the region’s GDP.
“Very often subsidies do not go to the poorer parts of society,” Ahmed said. “Moving from price subsidies to targeted subsidies will improve public finances and efficiency of the subsidies. This will not happen in the next year, but needs to be addressed in the medium term.”
He also said the popular uprising across the Arab world show that regional governments need to “focus more on socially inclusive growth strategies, and move from focusing purely on growth and macro-stability to creating diverse economies, transparent governance, and job creation”.
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