GCC economies set to grow in 2018, 2019 despite challenges: IMF

Economic growth in the Gulf Cooperation Council (GCC) countries is expected to recover to 2.4 percent this year and three percent in 2019, following a 0.4 percent contraction last year, the International Monetary Fund (IMF) said in its latest regional outlook on Tuesday.

The primary drivers of the potential growth include implementation of public investment projects in Kuwait and the ongoing preparations for Expo 2020 in the UAE.

Given the rise in oil prices - which are up 60 percent since the past two years - and non-oil activity, fiscal balances are expected to improve notably across the Middle East's oil exporters.

Overall, fiscal deficit for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) oil exporters is projected to decline to 1.6 percent this year from 5.1 percent of GDP in 2017. The fiscal deficit is expected at 0.1 percent in 2019, and to average 1.1 percent during 2020–23.

Despite their varying fiscal stances, MENAP oil exporters confront similar medium-term fiscal challenges, given their high dependence on oil revenue which impact their fiscal balances.

Though the current environment of temporarily high oil prices provides an opportunity for countries to rebuild buffers, potential threats to the global outlook, including rising trade tensions, may put additional downward pressures on oil prices, the report said.

"Therefore, countries should further strengthen their fiscal frameworks to create space in the event policy support is needed.”

Oil prices are likely to decline gradually to about $60 a barrel by 2023.

Meanwhile, growth in non-GCC oil exporters is estimated to slow to 0.3 percent in 2018, from 3 percent in 2017, due to the expected impact of the re-imposition of US sanctions on Iran.

Growth will, however, pick up modestly to 0.9 percent in 2019, the IMF added.