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GCC current account surplus to hit $275bn on higher oil prices

REUTERS/Christian Hartmann

Gulf oil exporters are expected to put away around a third of their oil revenues over the next three years.

Higher oil and gas prices are predicted to increase the average current account surplus in the GCC to 9.7 percent of GDP in 2022, according to the International Monetary Fund (IMF).

This is up from 4.6 percent of GDP last year, leading to an additional surplus of $275 billion.

The IMF said this would lead to an improvement in the overall fiscal balance, but stressed the need to resist temptations to revert back to pro-cylical spending.

“Many (Gulf states) confirm that this time they will stick to their fiscal discipline plans. The proof is going to be in the pudding,” IMF Middle East and Central Asia department director, Jihad Azour, told Reuters.

“Oil exporters must increase and strengthen their buffers and use this moment as a litmus test for sustainable diversification.”

Middle East oil exporters are expected to outperform peers, with projected growth at 5.2 percent this year following 4.5 percent growth in 2021. This is boosted by high oil prices and robust non-oil GDP growth offsetting rising global interest rates and high food prices.

Growth is expected to moderate in 2023 to 3.5 percent as oil prices decline and global demand slows, the fund added in its latest report.

For top exporter Saudi Arabia, the IMF forecast growth of 7.6 percent this year, slightly below the government’s forecast of 8 percent and compared with 3.2 percent in 2021.

The kingdom’s oil sector growth was seen falling to 3.3 percent next year, from 13.1 percent in 2022, while non-oil GDP is forecast at 3.8 percent in 2023 versus 4.2 percent this year.

“Our policy recommendations for Saudi as well as for other oil exporting countries is to keep the path of reforms that helps diversify the economy, improve productivity (and) avoid pro-cyclical policies,” Azour said.

The size of the non-oil sector has been growing in Saudi Arabia, the United Arab Emirates and other Gulf states with new sectors opening and attracting investment, while the financial sector is “well-capitalised, profitable and strong”, he said.

Azour urged increased efforts for economic diversification, legislative reforms to increase productivity and strengthening infrastructure to support private sector growth.