GCC financial basics are estimated to reinforce in 2021 on the rear of lightness in oil costs, however, the drawn-out lower incomes would strain the GCC government spending, business analysts cautioned.
The International Monetary Fund provided that while oil costs as of late arrived at their most elevated levels since before the pandemic, largely thanks to an Opec cut in supply, in the long-term oil incomes will be lesser provided to strained government costing across the GCC.
Tim Callen, associate head of the Middle East and Central Asia division at the International Monetary Fund, said GCC nations experienced two huge stuns in 2020: the Covid-19 pandemic and disturbances in oil costs.
Speaking in an event about the GCC economic likelihoods for 2021 hosted by Chatham House in London, Callen provided that the good news is that some nations have already executed adjustments. However, he further added that this will “require sustained fiscal reforms that look across the gamut of the government wage bill, energy prices in the system, non-oil, tax revenue bases — and not all of the countries have yet introduced a value-added tax, for example.”
Cases of the virus are on its verge in the region around the middle of the year, in relation to which GCC nations imposed tight lockdowns and implemented transportation restrictions. The count of cases starts to decrease and lockdowns were released, which helped the economic recovery in the second half of the year, the IMF checked.
The previous week, Jihad Azour, director of the Middle East and Central Asia Department at the IMF, provided that the path to recovery for the region would join on containment measures, admittance to and circulation of antibodies, the extent of arrangements to help development, and measures to alleviate financial scarring from the pandemic.
Monica Malik, chief economist, Abu Dhabi Commercial Bank, provided that the GCC economic fundamentals are estimated to built-in 2021, helped by a higher oil price and as the global economy will certainly come up from the pandemic.“The rollout of vaccines is very positive for the externally facing GCC economies, providing a path to global and regional recovery. Moreover, we expect the GCC’s fiscal and external positions to improve markedly in 2021 with higher hydrocarbon income.”
She calculated that the GCC real non-oil GDP activity to increase by 3.2 percent in 2021, after restricting by 4.4 percent in 2020. The prediction growth for 2021 is over the trend level since 2016, albeit showing a low base in 2020 because of the pandemic. Indeed, the whole together headline output gap in the GCC caused by Covid is not awaited to completely close in 2022.
“Various Covid-related risks persist, including delays to global vaccine programs, virus mutations, and deepening restrictions in early 2021. These factors are clouding the near-term outlook. We expect the externally facing service sectors to start to recover in a more meaningful and sustained way from 2H2021 as global immunizations reach a critical level,” said Malik.
The ADCB economist anticipates the three largest GCC economies – Saudi Arabia, the UAE, and Qatar – to witness the strongest non-oil recoveries in 2021, albeit with differences in drivers.
The UAE’s outlook is associated with the global outlook and containment of the virus. “We see a more fundamental rebound in 2H2021 than in 1H, as the global vaccine rollout will accelerate and hosting the Expo will provide an additional boost for travel and tourism-related areas”.