‘GCC current account balance again becomes positive’
BRUSSELS, May 30, (KUNA): The six-member Gulf Cooperation Council (GCC) countries have implemented significant fiscal consolidation and this has improved the fiscal balances of most countries in the region, according to a report released in Brussels Tuesday.
The report titled “Economic developments in the six GCC countries” (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) was published by Credendo, the Belgian export credit agency. The lengthy report notes that the regional current account balance has again become positive ($30 billion surplus in 2017) due to cuts in capital spending, which reduced imports, and also due to the recent increase in the oil price. It argues that “Qatar, the UAE, Saudi Arabia and Kuwait have the financial resources to continue the reforms at a more gradual pace, which is why growth is expected to recover slightly in 2018 in these countries.”
The significant financial buffers also allow the countries to support the currency pegs, which for all countries remain an important anchor for economic and financial stability, it says. “Nevertheless, while most countries seem more committed than ever to diversifying their economy, it is necessary to maintain the pace of reform.
At the same time, reforms will have to be implemented in such a way that the impact on economic growth and employment is mitigated,” it says. The report also mentioned Kuwait’s economic growth is recovering slowly. “While diversification is again placed high on the agenda, it will still take a long time for the diversification and reforms to structurally change the economy of the region and lead to significant alternative revenue sources in the six countries,” it concludes.
“A further question is related to the sectors on which the countries will focus in an attempt to diversify their economy. The two best performing countries in terms of diversification, Qatar and the UAE, succeeded in this by investing heavily in infrastructure. Both countries have significantly expanded their port capacity.
This has made the UAE a major regional trade hub. Qatar has also invested heavily in this and has expanded its banking sector,” it argues. “A focus of the further reforms will have to be the rebalancing of the role of the government in the economy, both as an employer and as a provider of services. Currently the situation is such that in most of the countries, people try to get government jobs given that, compared to the private sector, these jobs pay better and because working conditions are easier in the public sector,” it says.