Gulf states must take measures to improve private sector investment and job creation, International Monetary Fund (IMF) Managing Director Christine Lagarde said late Sunday.
The warning came as the countries of the Gulf Cooperation Council (GCC) face falling oil prices that are threatening their fossil fuel-focused economies.
“At the moment, a large share of fiscal and export revenues in the GCC come from oil,” Lagarde said at a meeting of GCC finance ministers in Doha, Qatar. “With oil prices having declined sharply since mid-2014, export revenues are expected to be nearly $275 billion lower in 2015 than in 2014.”
The IMF predicts growth across the region will slow to 3.2 percent in 2015 and 2.7 percent in 2016, compared with 3.4 percent in 2014.
“Governments should continue to take steps to switch the focus of growth away from the public and toward the private sector,” Lagarde said in her speech, which was emailed to Anadolu Agency. “With some two million people likely to enter the labor force in the GCC by 2020 and given the fiscal constraints on further increasing government employment private sector, job creation needs to be stepped up.”
She said the degree of adjustment needed would vary from country to country among the six-nation bloc.
“Well-planned fiscal consolidation strategies need to be put in place as soon as possible and communicated so that people understand how the adjustment will take place,” the IMF chief said.
She said all countries need to focus on expanding non-oil revenue; raising energy prices; firmer control of spending, particularly public sector wages; and a review of capital expenditure.
“Reforms to strengthen the fiscal frameworks would support these consolidation efforts,” Lagarde said.
In its most recent report on the GCC economies, published at the end of 2014, the IMF noted they had nearly all implemented economic development programs to boost job skills and develop new industries.
“Nevertheless, to date these diversification strategies have yielded mix results,” the report stated, noting they were still heavily linked to oil prices while export diversification was “more limited.”