In light of the COVID-19 pandemic, strong public health systems and timely fiscal and monetary intervention by Gulf governments and central banks have helped avert deeper health and economic crises, according to the chief of the International Monetary Fund (IMF).
IMF Managing Director Kristalina Georgieva, while speaking at a meeting of GCC finance ministers and central bank governors recently, said fiscal packages and liquidity support protected regional economies and also shielded incomes and livelihoods.
“I want to stress where you have been really exemplary in this region BY rising to the challenge with swift policy responses. Timely and innovative measures included tax exemptions and deferrals, cash transfers and subsidies to small and medium-sized enterprises. Now, you need to increasingly target households and businesses most in need and start shifting support away to firms that are likely to succeed and to individuals most in need.”
Policymakers of the six-member economic bloc of the GCC have strengthened the already-strong public health systems, maintaining fatality rates in the country among the lowest in the world, she said. The UAE, the second-largest economy in the Arab world, and Bahrain have deployed some of the world’s largest per capita testing and contact tracing regimes.
“I cannot stress enough how important having those in place is for people and for the economy,” Ms Georgieva said.
By upending global markets and severely disrupting the travel and tourism industry, the pandemic has tipped the global economy into its worst recession since 1930.
The IMF forecast global production to shrink 4.4 percent in 2020 with a slow and inconsistent recovery next year in its new World Economic Outlook published earlier this month. This year, the GCC economy is projected to shrink by 6%, less than the previous 7.1% contraction estimate. In 2021, the fund expects Gulf economies to grow by 2.3 per cent.
Globally, governments and central banks have rolled out more than $12 trillion in fiscal and monetary support so far to stabilize financial markets and protect jobs. The UAE was the first to phase out a $27.25 billion stimulus in March in the Middle East and North Africa (MENA) region to help businesses and individuals impacted by the pandemic. Subsequently, the package, which included zero-cost loans and looser capital requirements to improve lending, was increased.
With the pandemic still raging in most parts of the world, policymakers in the region need to maintain their supportive fiscal and monetary policies until “we are out of the woods”, Ms. Georgieva said.
Diversification of government revenue and spending efficiency should take precedence in terms of continued economic reforms across the hydrocarbon-rich region, she said.
Governments should also look at ways to enhance social safety nets, improve the management of government assets and liabilities and develop stable medium-term fiscal frameworks to ensure stability.
The IMF, she added, will assist and support in the stress-testing of medium-term financial structures and further improving these policies.
“We are also very keen to continue work on social spending for inclusive growth in the region,” Ms Georgieva said.
She also said that the GCC, which is trying to increase the proportion of renewables in its energy mix, has 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.”
Ms. Georgieva also commended the leveraging of technology by Gulf countries, which she said helps businesses and the workforce function even in the midst of the pandemic.
“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,” she concluded.
The International Monetary Fund (IMF) is an organization of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.