Non-oil sector and government spending support growth in Gulf states

The GCC Statistical Center is expecting a slight improvement in the growth of its economies this year and next due to rising oil prices, the increased contribution of the non-oil sector to GDP and the increase in public spending, which is expected to increase by 5%. Percent this year and next year. "

The commitment of the Gulf countries to reduce oil production through OPEC and independent producers to support oil prices in global markets means that the growth of the GCC economies will depend in a way major non-oil sectors over the next period. Higher interest rates and higher borrowing costs for consumers and businesses, associated with lower levels of consumption, investment and economic activity, are key factors that will increase the pressure on economic performance, while the GCC countries could face an additional challenge by strengthening their national currencies If the value of the US dollar increases, this could increase the risks for the competitiveness and diversify the non-oil sector.

He added that consumer prices (inflation) could increase slightly due to the application of value added tax in several GCC countries, in addition to continuing to correct labor markets to increase the rate job relocation.

He pointed out that these factors required close alignment between fiscal and monetary policies to offset the effects of rising interest rates and strengthen consumer and investor confidence in the GCC economies in the future. close.

The report projects constant-price GDP growth for GCC countries at 2.2 percent this year and 2.8 percent next year, compared to minus 0.2 percent in 2017, while GDP growth at current prices is expected reach 6.4% this year and 4%. 1% next year, from 7.5% until 2017.

Non-oil GDP growth at constant prices is expected to reach 2.2% and 2.7% in the current year and next, compared to 1.8% last year, he said. declared. Inflation could reach 2.1% this year and 2.8% next year, compared to 1% in 2017. As for the trade balance as a percentage of GDP, it should record 5.4% and 3%. % during the year. And next year, 2.3% last year.

The report pointed out that the tightening of US monetary policy and rising interest rates are a challenge for GCC countries because of their commitment to the free movement of capital and the exchange rate regime. dollar, as well as the required consistency between local interest rates and interest rates in the United States in order to reduce the risks for rate stability.

In addition, high interest rates and increased borrowing costs for consumers and businesses continue to accompany low levels of consumption, investment and investment. Economic activity, which accentuates the pressures on economic performance. GCC countries also face the challenge of strengthening their national currencies alongside the appreciation of the dollar. Risks for the competitiveness and diversification of the non-oil sector.

The report highlighted the improvement in oil revenues over the past year, as well as the reduction of the fiscal deficit and the slowdown in the growth of the public debt. He added that programs to boost non-oil revenues, including value-added tax, help reduce the GCC deficit of the general government balance in the coming period.

According to the report, public spending would increase by about 5% in 2018 and 2019. He stressed that public spending, especially current expenditure, was one of the main determinants of short-term growth in the economy. GCC's economy, given the adoption of private sector activities in government services and projects.

He pointed out that the decline in local liquidity growth resulting from rising interest rates in some GCC countries in accordance with US monetary policy, but pointed out that the impact of the decline in the growth would not threaten domestic credit growth in the near term, given the high level of liquidity in the banking sector. Growth in domestic credit is expected to slow as a result of reduced consumption and public and private investment.