Source: International Monetary Fund
October 25, 2020
International Monetary Fund (IMF) Managing Director Kristalina Georgieva made the following remarks today during the meeting of the ministers of finance and central bank governors of the Gulf Cooperation Council (GCC):
« Assalamu alaikum! Ministers, Governors, I am pleased to be with you to continue our conversation from earlier during the Annual Meetings.
“As you have heard me say, the global economy, after the shock of dramatic lockdown, has started its ascent from the depths of the crisis, but it will be long, uneven and prone to setbacks.
“The resurgence of the virus in Europe and the U.S. demonstrates very clearly that the course of the pandemic plays a significant role in the long ascent. Global growth this year is projected to be negative 4.4 percent, an upward revision of 0.8 percent compared to our June forecast, but of course still very weak. We project a partial recovery in 2021, with growth of 5.2 percent, which is 0.2 percent below our June projection.
“Hopefully, we will have vaccines and accelerated delivery everywhere. But we also know that there is a possibility for reopening and robust economic revival if we are determined to apply measures we currently have, such as: testing, contact tracing, self-isolation, quarantines, masks, and social distancing.
“What do we see for the GCC? We see a six percent GDP contraction in 2020, followed by growth of 2.3 percent in 2021. We also, as you very well know, recognize that you face large fiscal and external deficits. These projections reflect the combined impact of oil price declines, oil production cuts, and of course, as everywhere else, lockdowns. And they assume continued progress in fighting the virus.
“It is very important to recognize that the region is likely to see, in the medium term, economic scars: unemployed workers, reduced business investment, students who have been out of school—which takes away from productivity in the future by harming the human capital of the region. As you know, we also have to brace for possibly prolonged low oil prices and prepare for advancement toward alternative sources of energy.
“Next, I want to stress where you have been really exemplary in this region—rising to the challenge with swift policy responses.
“You have enhanced already-strong public health systems, and that has kept fatality rates in the GCC among the lowest in the world. And that is precious because this crisis is above all a human tragedy. You have taken as good care as possible of your people. Bahrain and the UAE rapidly deployed some of the largest per capita testing and contact tracing regimes in the world. And I cannot stress enough how important having those in place is for for people and for the economy.
“Fiscal packages and liquidity support have protected incomes and livelihoods, and the financial sector. Timely and innovative measures included tax exemptions and deferrals, cash transfers, and subsidies to small and medium-sized enterprises.
First, continue doing what you know works. Keep investing in health systems. Maintain supportive fiscal and monetary policies until we are out of the woods of the health crisis. And increasinglytarget households and businesses most in need. Then start shifting support away to firms that are likely to succeed and to individuals most in need.
Then accelerate reforms. What are the priorities?
Diversifying government revenue, something that you have already started; and making spending more efficient.
Diversifying and greening your economies.
Creating opportunities, especially for young people and women.
“Let’s look at each of these.
In the fiscal area, in recent years, Saudi Arabia has diversified revenues by establishing excises and a value added tax (VAT). And it has reallocated spending to focus on the pandemic.
Oman is likewise cutting some spending and starting a VAT. The UAE and Bahrain have introduced VATs as well. And the Emirates, Qatar, and other GCC members are cutting inefficient fuel subsidies. All of this is very positive, and it needs to continue. And strengthening social safety nets, improving the management of government assets and liabilities, particularly given the increase in debt. And most important, putting in place robust medium-term fiscal frameworks so we can anchor expectations for stability.
“Next,diversifying and greening GCC economies. You are already doing a lot of this.
I want to praise you for what you have done on digital. Full standalone 5G wireless in this region will enable remote work, education, telemedicine, and e-government, and you can pursue with even more imagination the application of technologies to be even more competitive in areas where the digital revolution clearly is accelerating .
“And if I may say, you have such a wonderful chance to go green. The sun is as abundant—more abundant than oil. I want to praise the UAE for building the world’s largest solar power plant. And you can continue what you have been doing, making sure that nature, something that you so much value, is vibrant and resilient.
“Next, I want to praise the Saudi G20 presidency for the focus on access to opportunity, especially for youths and women. You have 2.5 million young GCC nationals entering the workforce by 2025. Just imagine what can be done if they all have enhanced access to opportunity.
“And I want to recognize that Qatar has introduced a minimum wage for expatriates, and made it easier for them to change jobs. And Saudi Arabia has opened up the labor market more to women.
“How can the IMF help?
We are there with you to further develop these policies, to help you stress test your medium-term financial frameworks. We are also very keen to continue work on social spending for inclusive growth in the region.
We also count on you for camaraderie with poor countries, especially the fragile states that are in your neighborhood. We count on you to help us help them make your region more secure.
Working together in this very difficult environment can help us find the way up this mountain we are climbing in this crisis.
Thank you. Shukran.”