Governments have prepared ambitious programmes to overhaul economies as low oil prices bite
The Washington-based IMF says that after preparing economic reform programmes, countries in the region, such as Saudi Arabia, must implement those plans swiftly to meet the demands of growing populations.
Reforms plans across the region include introducing taxation and reducing subsidies, as well as a renewed focus on the private sector. The most high-profile of these reform programmes is Saudi Arabias National Transformation Programme (NTP), which was launched in late April by Deputy Crown Prince Mohammed bin Salman al-Saud.
The challenge now for all of these countries will be to go from plans to implementation and to design the implementation in a careful way and to sustain that effort over a number of years to make sure its prioritised to reflect also institutional capacity constraints, said Masood Ahmed, director, Middle East and Central Asia, at the IMF, speaking at a press briefing in Washington on 7 October. Its important to get on with this because otherwise, if you just look at the numbers of the next five years, some little over 2 million young people are likely to join nationals, are likely to join the labour force in these countries and almost half of them risk becoming unemployed unless we can accelerate the pace of job creation in the private sector.
Economic growth is another area of concern for the IMF as governments around the region cut back on spending. Governments have started to cut back on their spending and because of confidence affects also the private sector, youre seeing in every country that is an oil exporter, non-oil growth is lower than it was the year before, said Ahmed.
GDP growth in the GCC this year will be 1.8 per cent, and the IMF expects it to rise in 2017, although it will remain low when compared with previous years. Hopefully, we believe it will rise a little bit next year as the fiscal consolidation headwinds ease, said Ahmed. But even though looking out in the medium term, non-oil growth numbers are going to be substantially lower than they were in the five years leading up to 2015.
Slightly higher oil prices this year have allowed the IMF to revise down its forecast for the regions budget deficit. We have revised down our estimate of the cumulative budget deficit for these countries over the period of 2016-21 from more than $1 trillion, which is the number I gave you in the spring to $760m; $765bn over that period, said Ahmed. Bringing that number down through additional action to cut back on spending to raise revenues and in the meantime, of course, to finance that deficit in a way that minimises the impact on the domestic banking sector, on liquidity and also, on growth.
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