ECONOMIC PERFORMANCE AND GEOPOLITICAL OUTLOOK FOR GCC REGION
By: An-Nahdah Editorial Team
Date: 2 February 2025
The International Monetary Fund (IMF) has recently assessed the economic and geopolitical outlook for the Gulf Cooperation Council (GCC) countries, in its report published in November 2024, highlighting several key points:
Economic Outlook:
Growth Projections: The IMF anticipates a rebound in the Middle East and North Africa (MENA) region’s growth to 4% in 2025, contingent upon the cessation of oil production cuts and the easing of regional conflicts. For 2024, growth is projected at 2.1%, a downward revision of 0.6% from earlier forecasts, largely due to the impact of ongoing conflicts and prolonged OPEC+ production cuts.
GCC Specifics: Within the GCC, non-oil growth has been robust, driven by government-led investments and reforms aimed at economic diversification. However, overall growth has decelerated due to cuts in oil production. The IMF projects that as oil production cuts are eased and natural gas expansion continues, the hydrocarbon sector will recover, supporting overall economic growth.
Geopolitical Outlook:
Regional Conflicts: The IMF notes that recent escalations in regional conflicts have increased uncertainty and pose significant risks to the economic outlook. The fluid geopolitical situation is not fully factored into current analyses, and
further escalations could materially impact economic projections.
Policy Recommendations by IMF Staff:
Structural Reforms: The IMF emphasizes the need for continued structural reforms to enhance medium-term growth prospects. Priorities include improving governance, creating jobs (especially for women and youth), promoting investment, and developing the financial sector. Such reforms are essential to strengthen the private sector and diversify the economy, making it more resilient to external shocks.
Fiscal Sustainability: Despite current account balances narrowing, the IMF notes that external buffers remain comfortable. However, the GCC’s fiscal surplus is expected to continue narrowing, reaching 0.1% of GDP in 2024. The IMF recommends that GCC countries maintain fiscal discipline and continue implementing fiscal reforms to ensure long-term fiscal sustainability and macroeconomic stability.
In summary, while the GCC countries have demonstrated resilience amid regional turbulence, the IMF underscores the importance of ongoing reforms and prudent fiscal policies to navigate the challenges posed by geopolitical uncertainties and to
achieve sustainable economic growth.