The region is enjoying unprecedented balance of payments surpluses and record foreign direct investment flows, according to the IMF.

Khan told the annual conference of the Emirates Center for Strategic Studies in Abu Dhabi on 1 April that the size of the GCC economies expanded to more than $800bn million in 2007.

Gross domestic product (GDP) per capita rose above $20,000 for the GCC as a whole. In Qatar it rose above $70,000, while in the UAE the figure rose above $40,000.

Khan said the GCC current account surplus rose to $225bn in 2007 compared with about $200bn in 2006. This was the third consecutive year that the surplus was more than 25 per cent of GDP and it has raised the total surplus over the last five years to $750bn.

“Most of this has been invested abroad,” said Khan, adding that Egypt was the top regional recipient of GCC investment at $3bn.

Khan said that foreign direct investment in the GCC also reached record levels in 2007 of $35bn.

Khan said that rising inflation was probably the largest economic issue facing the GCC. “There is a need to reduce supply constraints and contain demand growth," he said.

He acknowledged, however, that there was a limited range of policy instruments, other than revaluation, that governments could use.

The IMF reported that inflation in the GCC in 2007 was at an average of 7 per cent but was in double-digits in Qatar and the UAE.