IMF forecasts GCC budget surpluses to disappear by 2019

The budget surpluses enjoyed by GCC states for more than a decade will be eliminated by 2019, a report in IMF Survey published today shows.

The IMF forecasts that Bahrain and Oman will record fiscal deficits this year, which makes them increasingly vulnerable to a sustained decline in oil revenues. It says most Middle East oil exporters do not save enough of their oil windfalls for future generations, says the report.

“Governments will need to find ways to rein in hard-to-reverse current expenditures, especially wages and subsidies. At the same time, they should target high-quality capital investments and social programs,” the IMF Survey reports the IMF Middle East Department Director Masood Ahmed as saying today in Dubai. “Structural reforms that bolster economic diversification and private-sector job creation for nationals are also high on the agenda.”

Aggregate GCC budget surpluses reached a peak of almost 15 per cent of combined GDP in 2012 on high oil prices and demand for GCC oil exports. Prices are expected to fall in the next five years and exports of GCC crude oil will fall due to rising domestic demand and increasing production from Iraq and Iran.

The GCC as a whole however has substantial accumulated surpluses and has strong borrowing capacity, economists say.

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