The International Monetary Fund (IMF) expects total growth in the Gulf Cooperation Council (GCC) to reach its all-time low of 0.5 percent this year, with oil production cut under the OPEC-led agreement, to rise again in 2018 to 2.2 percent.
The Gulf countries grew by 2.2 percent in 2016, according to IMF data. Cash also predicted a recovery in non-oil growth in the GCC countries to about 2.6 percent in 2017 and 2.4 percent in 2018, compared to 1.8 percent in 2016, as a result of the overall slowdown in fiscal discipline.
The IMF said in a report that the weakness of oil prices continued despite the extension of the decision to reduce production of OPEC, noting that the oil-exporting countries continue to «adapt to these low prices, which weakened growth, and contributed to a large deficit in public finances and external account».
He added that in the light of the decline in oil prices, the oil-exporting countries in the region have intensified their need to reduce their focus on the redistribution of oil revenues through spending on the public sector and supporting energy.
"To achieve this goal, these countries have developed ambitious strategies to diversify economic activity, but the prospects for medium-term growth are still below historical averages due to ongoing financial controls. These weak prospects for growth shed more light on the need to accelerate the implementation of structural reforms as well ».
"The six GCC countries are still committed to applying VAT, but at a different pace," said Jihad Azour, director of the Middle East's Middle East department. "I feel through my contacts with the authorities that they remain committed and continue to prepare for implementation." .
All countries in the Gulf Cooperation Council (GCC) are still committed to implementing the tax, including Qatar and Kuwait, and countries with larger financial reserves compared to the deficit may be able to adopt a slower pace of tax enforcement, he said. "The pace of implementation will vary ... Some will be implemented in 2018, Some may need more time. "
Azour said that because the two largest economies in the GCC were applying for VAT at the same time, trade flows in the region would not be disrupted if other countries imposed the tax at different times.
Azour said the 5 percent value added was one of the measures that would allow for the desired diversification for a long time. "The small percentage of the drawing will have a limited impact on inflation," Azour said, adding that it would allow between 1.5 and 2 percent Of GDP each year.
He advised the Gulf countries to accelerate the diversification of their economies, which are still dependent on oil to a large extent, considering it the right moment for it.
At the same time, he warned that the current crisis in the region could weaken growth, although he stressed that the economic impact of the crisis is still limited after about 5 months.
"The impact of the crisis on Qatar's economy is limited and its effects on the region are nil," he said. "So far, there are no signs that the crisis has affected growth in the GCC. "There are very limited effects on trade and almost no effect on oil prices."
Egypt
On the other hand, the IMF expects Egypt to attract more foreign direct investment, increase its exports as a result of floating exchange rates, lift foreign exchange restrictions, apply investment law and grant industrial enterprise licenses.
"Neum" will benefit the entire region
The IMF supported the Kingdom's ambitious plan to establish a $ 500 billion commercial and industrial zone across Jordan and Egypt, indicating that the project will benefit the entire region.
He said that Riyadh needed to balance the huge cost of the region and other economic projects and its efforts to reduce the large budget deficit caused by the drop in oil prices on the other side. He said the plan to create the region, known as the Neum, could stimulate trade and allow the Middle East to benefit from its position as a bridge between Asia and Africa. "It is a sign of greater regional cooperation," he said.
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