IMF Predicts more than 7 percent shrink in Gulf Economy

The International Monetary Fund (IMF) has predicted that the Gulf Cooperation Council (GCC) countries will see their economies shrink by 7.6 percent this year.

According to the details, an International Monetary Fund (IMF) official said six GCC nations are, with varying degrees, facing abrupt economic declines as the slowdown in business activity due to the coronavirus pandemic.

The IMF last earlier said Saudi Arabia’s economy — the largest in the Arab world — faces a 6.8 percent contraction this year.

Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said at Virtual Economic Forum “We expect the GCC economies to contract by 7.6 percent this year, the contraction will be across all sectors, oil and non-oil,”

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.

While addressing the summit, 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.