Ms.
Christine Lagarde, Managing Director of the International Monetary Fund
(IMF), issued the following statement today at the conclusion of a
meeting in Qatar with the finance ministers and central bank governors
of the Gulf Cooperation Council (GCC)[1]:
“I am
pleased for the opportunity to attend the GCC meeting and meet the
finance ministers and central bank governors of the Gulf countries to
discuss the outlook for the region. The meeting is an important platform
for policymakers to address problems in a cooperative way. During the
meeting, we exchanged views on the challenges facing the global economy
and the GCC region, and the policy responses needed.
“At the
moment, a large share of fiscal and export revenues in the GCC come
from oil. With oil prices having declined sharply since mid-2014, export
revenues are expected to be nearly $275 billion lower in 2015 than in
2014. The fiscal and current account balances in the region are
deteriorating sharply, with the fiscal balance projected by the IMF to
be in a deficit of 12.7 percent of GDP in 2015. Growth is also expected
to slow, with IMF projection suggesting 3.2 percent in 2015 and 2.7
percent in 2016, compared to 3.4 percent in 2014.
“The
GCC countries face the challenge of lower oil prices from...
a position of
strength. Prudent policies over the past decade have enabled them to
build up financial buffers which avoid the need for a sudden or
disruptive adjustment in fiscal policy. Nevertheless, with low oil
prices expected to persist for a number of years, all GCC countries need
to undertake some degree of fiscal adjustment, although the size and
urgency of this adjustment varies across countries. Well-planned fiscal
consolidation strategies need to be put in place as soon as possible and
communicated so that people understand how the adjustment will take
place.
“How
best to carry out this fiscal adjustment will depend on each country’s
specific situation. But the main elements are common across countries:
an expansion of non-oil tax revenues; raising energy prices which are
still well below international norms; firm control of current spending,
particularly on public sector wages; and a review of capital
expenditures. Reforms to strengthen the fiscal frameworks would support
these consolidation efforts.
“Banking
systems in the GCC generally appear well-placed to weather lower oil
prices, weaker growth, and higher U.S. interest rates. Nevertheless, as
oil revenues decrease, external financing conditions tighten, and
government debt issuance increases, central banks will need to remain
vigilant for stresses in the system and provide liquidity to the
financial sector if needed. Macroprudential policy can also help manage
any systemic stresses in the financial system if they were to emerge.
“Governments
should continue to take steps to switch the focus of growth away from
the public and toward the private sector. With some 2 million people
likely to enter the labor force in the GCC by 2020, and given the fiscal
constraints on further increasing government employment, private sector
job creation needs to be stepped up. Governments are already
implementing many policies in this direction, and important progress is
being made. Nevertheless, continued efforts are needed to encourage
nationals to seek employment in the private sector and for firms to hire
them.
“The
IMF will continue to deepen its relationship with the GCC through
regular country visits, technical assistance, and training. We stand
ready to support the GCC countries in any way they see appropriate as
they address the challenges of lower oil prices.
“I thank H.E.
Mr. Al-Emadi, Minister of Finance for Qatar, for chairing the GCC
meeting and for his government’s generous hospitality. I also thank Dr.
Abdul Latif bin Rashid Al-Zayani, the GCC Secretary General.”
[1] The GCC is comprised of Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the United Arab Emirates.
