Gulf Arab states shall accelerate reforms with unsustainable oil rally: IMF

DUBAI, May 2 (Xinhua) -- Six Arab oil states should carry out fiscal reforms and expand non-oil private sector to fuel economic growth as oil price rebound will not be sustainable, said an official with the International Monetary Fund (IMF).

The IMF assumes the oil price will average 62 dollars a barrel in 2018, and decline to 58 dollars per barrel in 2019, said Jihad Azour, director of the Middle East and Central Asia Department of the IMF, on Wednesday.

The "black gold" is a major income source for the six member states of the Gulf Cooperation Council (GCC).

Azour said that "there is no time for complacency, therefore we urge GCC governments to reduce spending on wages in the public sector and to impose structural reforms to ensure fiscal discipline and encourage local and foreign investments."

Other reforms on the expenditure side shall target revisions to retirement age and benefits, he said.

The introduction of a five percent value-added tax in Saudi Arabia and the United Arab Emirates (UAE) at the start of this year "was a step into the right direction and the IMF expects Bahrain to follow soon," said Azour.

"Any non-oil revenue which serves the fiscal budget diversifies the sources of income and reduces the future income risk," he added.

The combined GCC gross domestic product (GDP) fell by 0.2 percent in 2017, mostly driven by a contraction in the Saudi economy.

However, "growth in the non-oil sector will lead the GCC back on to the growth path in 2018, but this growth will not be sufficient to create enough jobs," said Azour.

The Saudi economy is expected to resume to growth this year, after a 0.7 percent contraction in 2017, "which was the first contraction since 2009," he said.

Beside the risk of stagnating oil prices, "there is the risk that the level of interest rates will rise further and this could be in particular a challenge for countries with high debt levels," he added. Enditem