The six GCC oil producers remain “pillars of stability in the global oil market at a time when uncertainties are arising elsewhere” and their contribution to the global and regional economy continues to be “vital”, the IMF’s deputy managing director, Nemat Shafik, said following meetings with the GCC central bankers in Riyadh.  

Despite the challenging environment throughout the Arab World, the GCC economies are continuing to perform well and their aggregate GDP will grow by 3.7% in 2013, she added. Despite being lower than the strong average rate of 6.4% in 2010–12, the forecast growth is favourable by global standards, Shafik noted. Growth in the GCC will quicken to 4.1% in 2014 as oil output rises and the non-oil sector benefits from large public spending on infrastructure.

Shafik commended that GCC countries have built up substantial buffers  in recent years, saying that fiscal policy is well positioned to respond to challenges that may stem from the continued uncertain global environment. But fiscal consolidation, which is currently being implemented in most GCC states, is needed over the medium-term, she added. Continuing on this consolidation path in 2014 is appropriate, although fiscal policy has room to respond to external shocks, she added.

Creating jobs for the young and growing working age population in the GCC is a key challenge, Shafik said adding that additional reforms could help in curbing the growth of public sector jobs.