Economic growth in Gulf states is forecast to slow to 1.8 percent this year as the oil-dependent region cuts spending to battle fiscal deficits reaching 11.6 percent of gross domestic product. The International Monetary Fund said tighter fiscal policy, weaker private sector confidence and lower liquidity in the banking system was speeding the sharp decline in the Gulf Cooperation Council’s economic growth from 3.3 percent in 2015. The IMF in October forecast growth of 2.75 percent this year. “In the GCC, economic activity is projected to slow further,” according to an update to its regional economic outlook released on Monday. “Ambitious fiscal consolidation measures are being implemented this year, but budget balances will deteriorate nonetheless given the sharp drop in oil prices.”
The IMF, which said growth would recover to 2.3 per cent next year as fiscal deficits moderate to 10.8 per cent, warned that low oil prices and fiscal tightening would continue to weigh on these economies for the medium term. GCC non-oil growth, for example, is projected at 3.25 percent over the next five years, well below the 7.75 per cent recorded during 2006-2015.