x Abu Dhabi, UAE Friday 21 July 2017

Gulf states should stick with stimulus

Now is not the time for Gulf states to mop up the huge stimulus pumped in after the global financial crisis.

The role of Gulf states in the global economy should be re-evaluated because their importance is underestimated, the managing director of the International Monetary Fund said yesterday. As the global economy recovers, the GCC's role is "very important" in helping to manage oil prices, which were a factor in determining the risk of a double-dip recession, said Dominique Strauss-Kahn at a meeting of GCC policy makers and the IMF. His comments follow a recent agreement by the Group of 20 advanced and emerging economies to give underrepresented countries greater power at the IMF. The replacement of the G7 by the G20 as the global forum for economic issues is expected to give Saudi Arabia, the largest economy in the Gulf, a stronger voice internationally. "As the recovery will go on, there is a risk of an increase in oil prices, so the way the GCC will manage this question has a lot to do with the risk of a double dip or the real recovery of the global economy," Mr Strauss-Khan said. Oil is a major driver of economic growth in the GCC, with four members of the council - the UAE, Saudi Arabia, Qatar and Kuwait - part of OPEC, which determines crude production in member countries on the basis of global demand. Mr Strauss-Khan said the four GCC states working towards a single currency were "still far" from reaching monetary union. Saudi Arabia, Kuwait, Qatar and Bahrain are pressing ahead with plans for the new shared currency despite the withdrawal of the UAE and Oman from the proposals. A GCC monetary council is expected to be established by the start of next year, opening the way for the creation of a central bank to issue the currency. Abdul Rahman al Attiyah, the secretary general of the GCC, said on Friday he was confident the monetary council would be established by January. Muhammad al Jasser, the governor of the Saudi Arabian Monetary Agency, told reporters yesterday that his nation's economic recovery was under way and that the kingdom's stimulus efforts would continue until the completion of planned projects. He said Saudi banks would make sufficient provisions for any doubtful debt, including that of the Saad and Al Gosaibi groups, which defaulted on repayments this year. * with agencies tarnold@thenational.ae