The International Monetary Fund (IMF) has reconfirmed that blockade imposed on Qatar by the neighbouring countries has not impacted the implementation of key projects in Qatar. The initial concerns that that disruptions could impact the implementation of infrastructure projects has been mitigated by the availability of an inventory of construction materials and of alternative, and competitive, sources of imports , IMF noted in its latest report.
Qatar has rerouted its trade through Kuwait and Oman, and alternative food supply sources have been established, allaying fears of potential shortages. Qatar is also accelerating efforts to further diversify sources of imports and external financing, and to enhance domestic food processing, IMF noted in its report on ‘Economic outlook and policy challenges in GCC countries.”
According to the fund, GCC countries are continuing to adjust to lower oil prices. Substantial fiscal consolidation has taken place in most countries, mainly focused on expenditure reduction. This is necessary, but it has weakened non-oil growth.
With the pace of fiscal consolidation set to slow, non-oil growth is expected to increase to 2.6 percent this year, from 1.8 percent last year. However, because of lower oil output, region’s overall real GDP growth is projected to slow to 0.5 percent in 2017 from 2.2 percent in 2016. Growth prospects in the medium-term remain subdued amid relatively low oil prices and geopolitical risks.
Diversification and private sector development will be needed for GCC countries to offset lower government spending and ensure stronger, sustainable, and inclusive growth.
This will require stepped-up reforms to improve the business climate and reduce the role of the public sector in the economy through privatization and PPPs. Reforms are needed to increase the incentives for nationals to work in the private sector and for private sector firms to hire them. Increasing female participation in the labour market and employment would benefit productivity and growth across the region.
On the global outlook for the GCC region, the report noted oil prices are expected to remain subdued in the medium term compared to their level before mid-2014. After a slow start to the year, global oil demand recovered in the second quarter of 2017 and is expected to grow by about 1.4 to 1.5 million barrels per day in the context of higher global growth.
While geopolitical tensions could potentially cause oil market disruptions, high inventory levels and a rapid response from US shale producers should limit the scope for a sharp rise in prices.
Oil demand will be importantly influenced by global economic conditions. Since the forecasts were finalized, oil prices have moved higher.
The report noted GCC countries are continuing to adjust to relatively lower oil prices. While non-oil growth is recovering in some countries, medium-term prospects remain relatively subdued, highlighting the importance of accelerated efforts towards economic diversification and private sector development. Financial sectors remain resilient and financial stability risks appear low.
Looking to 2018, real GDP growth is expected to pick-up to 2.2 percent. Oil output is expected to increase by 1.9 percent (the projections were finalized before the recent decision to extend the production cuts to end-2018.
Non-oil growth is projected to weaken slightly to 2.4 percent. Over the medium-term, non-oil growth is projected at around 3.4 percent.
The Peninsula Qatar