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THE INTERNATIONAL MONETARY FUND URGES TARGETED FINANCIAL MEASURES IN THE GULF COUNTRIES
The International Monetary Fund said that the double shock of the Corona virus and the decline in oil prices should
prompt Gulf countries to give priority to providing financial support to sectors affected by their non-oil economies, which are expected to slow this year.
This comes at a time when governments and central banks of the oil-exporting Gulf countries have so far launched broad-based stimulus packages to mitigate the economic impact of the epidemic.
Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund, told Reuters that the authorities in the Gulf countries should adopt a targeted approach to better support their economies and maintain their ability to recover after the epidemic. "Not all sectors have been affected this year, so you do not need in the beginning the comprehensive measures," he added.
Azour pointed to the tourism sector in Bahrain, Qatar, transportation and logistics in the UAE as the sectors that should benefit from financial support.
The stimulus packages put up to date have reached about 30% of GDP in Bahrain and Oman, and more than 10% in the UAE and Qatar and more than 4% in Saudi Arabia, according to Fitch Ratings.
"The ability to deal with the problems facing the economy is on a country-by-country basis, and it is more important than the size of the (stimulus) package," Azour said. He added, "But one has to accept that growth this year will slow, as will growth in oil-exporting countries, especially the non-oil sector."
The International Monetary Fund said this week that the Corona virus pandemic would lead to a global recession in 2020 that could be worse than the spark that fueled the global financial crisis in 2008 and 2009.
He added that while the oil-exporting Gulf states can depend in the short term on external financing and the use of some of their reserves, "the real challenge will be greater for oil-importing countries with high levels of debt."
Gulf countries that have exported crude have introduced fiscal policies such as imposing value-added taxes to diversify their revenues away from oil since its price declines in 2014 and 2015.
"This is something that will help them over time ... It is also an opportunity for countries to review some of their previous policies," Azour said.
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