Satyendra Pathak
Doha
The Gulf Cooperation Council (GCC) region has remained a ‘bright spot’ in the world economy amidst global economic turbulence with low unemployment, controlled inflation, and rapid recovery in trade and international travel, IMF Managing Director Kristalina Georgieva has said.
Addressing finance ministers and central bank governors of GCC countries during a meeting hosted by Minister of Finance HE Ali bin Ahmed Al Kuwari in Doha on Thursday, the IMF managing director praised the region’s resilience amidst global economicturbulence.
The meeting reviewed various financial and monetary topics, including discussions on the IMF’s recent paper. Key points included the importance of focusing on policies that ensure financial sustainability, such as enhancing non-oil revenues and increasing investments in renewable energy sources.
Additionally, the governors emphasized the need for structural reforms to promote private sector-led growth and create job opportunities.
Addressing the meeting, Georgieva reflected on the shifts in the global economy since the Spring Meetings, highlighting the rebalancing of global growth with emerging Asia, driven by strong demand for semiconductors and electronics, as the primary engine. However, she also noted that near-term global growth faces constraints due to conflicts and disruptions in commodity production across the Middle East, Central Asia, sub-Saharan Africa, and Latin America.
While recent developments suggest a “smooth landing” for the world economy, Georgieva expressed concern about the uncertainty surrounding the global outlook. She cited the growing risks of protectionism, which threaten to raise trade and production costs, and the uncertain path of monetary and fiscal policies worldwide.
Notably, she pointed to the US Federal Reserve’s recent 50-basis-point interest rate cut and market turbulence following a rate hike by the Bank of Japan as signs of how monetary shifts in major economies are affecting global markets. She also stressed that fiscal policy, which has room to maneuver due to looser monetary conditions, must focus on long-term consolidation, particularly in countries with limited fiscal buffers.
Turning to the GCC, Georgieva described the region as a “bright spot” in the global economy, with low unemployment, controlled inflation, and rapid recovery in trade and international travel. She projected a positive outlook for the region, with overall growth expected to rebound in 2024 and strengthen to nearly 4 percent by 2025 as oil productioncuts ease.
Non-hydrocarbon sectors are set to remain strong, supported by the region’s ongoing reform efforts. However, she warned that fluctuations in oil prices and production could still pose risks to financial stability and spill over into the broader non-oil economy.
Georgieva urged GCC policymakers to maintain their reform momentum, especially in fiscal policy, structural reforms, and regional integration. She praised the region’s efforts at fiscal consolidation but emphasized the need for more substantial progress in building financial reserves for future generations.
She highlighted the potential of tax reforms, including the global minimum tax initiative, and the reduction of energy subsidies as critical to creating fiscal space for public investment and targeted support for the vulnerable. Georgieva also noted that strong fiscal frameworks, such as adopting fiscal rules and medium-term frameworks, would enhance the sustainability of the region’s fiscal policies.
In terms of structural reforms, Georgieva commended the GCC’s remarkable improvements in the business environment, with four countries now ranked among the world’s top 30 most competitiveeconomies.
However, she stressed the importance of accelerating economic diversification, particularly through digitalization and AI adoption, while managing the risks associated with these technologies. She also called for continued reforms in the labor market, focusing on enhancing the skills of the workforce, reducing public-sector employment, and increasing women’s participation in the workplace.
Georgieva emphasized that deeper regional and global integration would play a crucial role in the GCC’s economic diversification strategy. Intra-GCC goods exports have surged to over $70 billion in recent years, but they still account for less than 10 percent of total exports, leaving significant potential for further regional trade growth.
She encouraged reducing non-tariff barriers to boost trade integration and enhance the region’s resilience against global economic fragmentation. Increasing financial integration, particularly by attracting foreign direct investment, would also be essential to supporting costly reforms and bringing in new technologies and expertise.
Concluding her remarks, Georgieva reaffirmed the IMF’s commitment to supporting the GCC in achieving its ambitious Vision targets. The IMF’s new Regional Office in Riyadh, along with its Center for Economics and Finance in Kuwait, will continue to provide policy advice and capacity development to assist the region in its reform efforts.
She praised the GCC’s contributions to IMF trusts and co-financing programs that help countries affected by global challenges, viewing this as a testament to the region’s dedication to international cooperation and economicreform.
As the world marks the 80th anniversary of the Bretton Woods conference, Georgieva called for renewed cooperation between the IMF and the GCC. She expressed confidence that the region’s continued efforts in fiscal consolidation, structural reforms, and integration into global systems would position it as a leading example of economic resilience and growth in an uncertain global landscape.
