AMF lowers Oman, GCC growth forecasts on oil price weakness

Date

9/26/2016 1:14:53 AM

(MENAFN- Muscat Daily) Muscat-

The Arab Monetary Fund (AMF) has lowered its 2016-17 economic growth forecasts for Oman and other GCC countries, as the economies are further weighed down by lower oil prices this year.

'The GCC countries are expected to be further affected by the lower-level of oil prices in 2016, unlike 2015 when they were able to adopt countercyclical policies to support economic growth,' the AMF said in its Arab Economic Outlook report published on Sunday.

The Fund revised its forecast for Oman's real GDP growth to 1.9 per cent this year, down 0.8 percentage point from its April forecast. The AMF now expects sultanate's economy to grow by 2.5 per cent in 2017.

According to the regional lender, overall GCC growth rate is expected to be 2.1 per cent this year, which is 0.4 percentage point lower than earlier forecast. In 2017, GCC growth rate is expected to rise to 2.4 per cent, supported by the likely increase in global oil prices, expanded oil production capacity and the implementation of a number of investment projects in the member countries.

Oman's growth is expected to exceed estimates for Saudi Arabia (1.7 per cent) and Kuwait (1.3 per cent) this year, while the economies of UAE, Qatar and Bahrain are expected to grow 2.8 per cent, 3.2 per cent and 2.5 per cent, respectively.

The Fund said non-oil activities in the GCC countries would be impacted by austerity measures adopted in 2016 to maintain fiscal discipline.

Oil-exporting countries in the region, the AMF said, have been experiencing a different economic reality since mid-2014 due to the declining trend of oil prices, which have lost about 61 per cent of their value during that time.

'These developments have affected economic activities and fiscal conditions, particularly in light of the important role of public spending in fostering economic growth in these countries. This new reality has forced many Arab oil-exporting countries to adopt some austerity measures that would affect public and private spending and may slow down growth achieved this year.'

The AMF estimates Oman's annual inflation rate to average 1.8 per cent this year before rising to 2.5 per cent in 2017, the lowest level of inflation in the GCC for both years. For the GCC as a whole, it said inflation rate will reach 3.8 per cent this year before slowing down to 3.1 per cent in 2017.

The Fund said the inflation rate in GCC countries was affected during the initial months of 2016 by the increase in the prices of fuel products and housing.

'The increase in the prices of fuel products was mainly related to the adoption of the automatic adjustment price mechanism in a number of GCC countries to link domestic prices of oil products to the averaged international prices over a certain period.'

It added the low levels of international prices for oil and basic commodities helped these countries to implement those policies and avoid strong increases in inflation levels.

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