Gulf economies to shrink by 7.6% this year, says IMF

Arab News - - Business - Reuters Dubai

Gulf Co­op­er­a­tion Coun­cil (GCC) coun­tries will see their economies shrink by 7.6 per­cent this year, an In­ter­na­tional Mon­e­tary Fund (IMF) of­fi­cial said on Tues­day, re­vis­ing down­wards April fore­casts of nearly 3 per­cent.

The six GCC na­tions are, with vary­ing de­grees, fac­ing steep eco­nomic de­clines as the slow­down in busi­ness ac­tiv­ity due to the coro­n­avirus pan­demic is am­pli­fied by a price drop in hy­dro­car­bons, which are their main source of rev­enue.

The IMF last week said Saudi Ara­bia’s econ­omy — the largest in the Arab world — faces a 6.8 per­cent con­trac­tion this year, sharper than the 2.3 per­cent the Wash­ing­ton-based lender had fore­cast in April.

“We ex­pect the GCC economies to con­tract by 7.6 per­cent this year, the con­trac­tion will be across all sec­tors, oil and non-oil,” Ji­had Azour, di­rec­tor of the IMF’s Mid­dle East and Cen­tral Asia De­part­ment, said on Tues­day at a vir­tual eco­nomic fo­rum.

He said oil-pro­duc­ing coun­tries in other re­gions were likely to see even larger drops.

Bahrain, one of the small­est Gulf pro­duc­ers, ex­pects its econ­omy to shrink in line with IMF fore­casts, cen­tral bank chief Rasheed Mo­hammed Al-Maraj told the fo­rum.

The IMF in April had pro­jected Bahrain’s econ­omy to con­tract by 3.6 per­cent this year.

Saudi Ara­bia’s cen­tral bank gov­er­nor said that the King­dom ex­pects its econ­omy to fare bet­ter than the IMF fore­cast.

With­out pro­vid­ing a number, Ahmed Al-Kho­lifey, gov­er­nor of the Saudi Ara­bian Mon­e­tary Author­ity (SAMA), said the IMF out­look was “more pes­simistic” than Saudi Ara­bia’s own pro­jec­tions. Al-Kho­lifey said SAMA was en­cour­ag­ing com­mer­cial banks to lend more to sup­port busi­nesses dur­ing the down­turn and that bank­ing in­di­ca­tors were re­as­sur­ing, with banks’ coverage for loans at over 140 per­cent in the bank­ing sec­tor.

In a “worst-case sce­nario,” he said, non-per­form­ing loans would not ex­ceed 4 per­cent of to­tal loans this year.

BACK­GROUND

The In­ter­na­tional Mon­e­tary Fund said this month that the COVID-19 pan­demic will cost the global econ­omy about

$12 tril­lion this year.

AFP

Women shop in a largely de­serted Hayat mall in Riyadh dur­ing the lock­down. The King­dom’s econ­omy will shrink by 6.8 per­cent, ac­cord­ing to the IMF.

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