Gulf Economies to Shrink by 7.6pc This Year, IMF Says

The Gulf Cooperation Council ( GCC) countries will see their economies decline by 7.6 percent this year, an official of the International Monetary Fund said on Tuesday, revising April's downward forecasts by almost 3 percent.

The six GCC nations are experiencing significant economic declines of various degrees, as the slump in market development attributable to the coronavirus pandemic is amplified by the decrease in hydrocarbon rates, which are their main source of revenue.

The IMF reported last week that Saudi Arabia 's economy – the largest in the Arab world – is experiencing a 6.8% downturn this year, which is worse than the 2.3% forecast by the Washington-based lender in April.

“We expect the GCC economies to contract by 7.6 percent this year, the contraction will be across all sectors, oil and non-oil,” Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said on Tuesday at a virtual economic forum.

He said oil-producing countries in other regions were likely to see even larger drops.

Bahrain – one of the smallest Gulf producers – expects its economy to contract in accordance with IMF forecasts, said Central Bank Governor Rasheed Mohammed al-Maraj, who also spoke at the conference.

In April, the IMF estimated that Bahrain 's economy will contract by 3.6% this year.

Saudi Arabia's central bank governor said then that the country intends its economy to do stronger than the IMF 's forecast.

Ahmed al-Kholifey, Governor of the Saudi Arabian Monetary Authority (SAMA), said the IMF 's forecast was "more negative" than Saudi Arabia's own forecasts.

Kholifey said SAMA was encouraging commercial banks to lend more to support businesses during the downturn and that banking indicators were reassuring, with banks’ coverage for loans at over 140 percent in the banking sector.

In a “worst-case scenario”, he said, non-performing loans would not exceed 4 per cent of total loans this year.