The energy ministers of Qatar (L) Mohammed bin Saleh al-Sada, UAE's Suhail al-Mazrouei (C) and Saudi Khaled al-Falih, attend the 3rd GCC Petroleum Media Forum on April 20, 2017 in Abu Dhabi. (Xinhua/AFP Photo)
DUBAI, May 2 (Xinhua) -- Despite the rebound in oil prices in the last 12 months, the International Monetary Fund (IMF) Director of Middle East and Central Asia Department Jiahd Azour said Tuesday that more reforms and fiscal consolidation are needed in the Gulf region's two biggest economies to spur growth.
Briefing the media about the IMF's outlook study the Middle East, North Africa and Pakistan released today, Azour said the IMF expects the UAE real gross domestic product to increase by 1.5 percent in 2017, down from 2.7 percent last year.
The picture look even bleaker for Saudi Arabia, the region's biggest economy, for which the IMF expects 0.4 percent this year, compared to 1.4 percent last year.
Both the UAE and Saudi Arabia are major oil suppliers. Azour noted while last year's agreement by major oil-producing countries to crude oil production has helped increase oil prices (from below 26 U.S. dollars in January 2016 to around 50 dollars nowadays), the IMF expects the price of oil to remain volatile around and to average 55 dollars per barrel (159 liter) in 2017 and in 2018.
Azour noted that energy price reforms in both countries have eased fiscal pressure and that the six Arab countries of the Gulf Co-operation Council (GCC) will introduce a five percent value-added tax on Jan. 1 2018. Consequently, the IMF expects the GCC to generate in 2017 a combined current account surplus, after two years of current account deficits.
In addition, liquidity in the Emirati and Saudi banking sector has eased in recent months, said the Washington-based multinational lender IMF in its outlook. For the UAE, the IMF sees loan demand rising due to the "idiosyncratic event," the World Expo which the UAE sheikhdom of Dubai will host from October 2020 to April 2021.
"However, more fiscal reforms and investments into non-oil sectors, education, healthcare, capital and social protection are needed," he added.
Azour said the UAE and Saudi GDP growth would pick up to 4.4 percent and 1.3 percent, respectively.