The International Monetary Fund said that the dual shock of the coronavirus outbreak and the decline in oil prices should prompt Gulf states to prioritize providing financial support to the affected sectors of their non-oil economies, which are expected to slow this year.
So far, governments and central banks in the oil-exporting Gulf countries have launched broad-based stimulus packages to mitigate the economic impact of the pandemic.
Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund, said that the authorities in the Gulf countries should adopt a targeted approach to best support their economies and preserve their ability to recover after the epidemic.
He added to Reuters, “Not all sectors were affected this year, so you do not initially need comprehensive measures.”
“...It has to be focused and well-designed,” he continued, adding that central banks and governments must coordinate their actions.
Azour pointed to the tourism sector in Bahrain and Qatar and transportation and logistics in the UAE as sectors that should benefit from financial support.
The stimulus packages proposed so far have reached about 30 percent of the gross domestic product in Bahrain and the Sultanate of Oman, more than ten percent in the UAE and Qatar, and more than four percent in Saudi Arabia, according to Fitch Credit Rating Agency.
Azour said, “The ability to deal with the problems facing the economy depends on each country individually and is more important than the size of the (stimulus) package.”
He added, “But one must accept that growth this year will slow, as will growth in oil-exporting countries, especially the non-oil sector.”
The International Monetary Fund said that the Corona virus pandemic will lead to a global recession in 2020 that may be worse than the one sparked by the global financial crisis in 2008 and 2009.