The oil-rich nations of the Gulf are set to post budget deficits this year after a plunge in crude prices, the International Monetary Fund said.
The six nations of the Gulf Cooperation Council will have a collective fiscal gap of 6.3 percent of GDP, a swing of about 11 percentage points from last year’s surplus, the IMF said in a report published in Washington Wednesday. While many nations have enough savings to avoid steep cuts and “limit the drag on growth,” they will need to adjust spending plans in the longer term, it said.
The IMF cut its 2015 growth forecast for the Middle East’s oil exporters to 3 percent from the 3.9 percent it projected in October. It kept the prediction for the region’s oil importers at 3.9 percent, saying that worse-than-expected demand in export markets in the Gulf and Europe will offset any benefits from cheaper energy.
The GCC nations, led by Saudi Arabia, are largely dependent on energy exports for government revenue. They have used high prices over the past decade to finance hundreds of billions of dollars in spending to create jobs and ward off the political unrest that has swept through other parts of the Arab world. Brent crude has slumped more than 50 percent since June and is trading at less than $50 a barrel.
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