The Institute of International Finance said that the Gulf Cooperation Council countries face the worst economic crisis in its history in light of the double shock of low oil prices and the Corona pandemic, but he expected the economy to return to growth in 2021.
The institute stated that the real GDP of the Gulf Cooperation Council countries will shrink in general by 4.4% this year, despite some indications of success in containing the outbreak of the virus, and easing some restrictions in recent weeks.
According to the Institute’s latest forecasts, the gross domestic product of the oil sector in the Gulf Cooperation Council countries will record a contraction of 5.3% as a result of the decision of the OPEC Plus group to reduce oil production, while the non-oil economy will shrink by 3.8% due to the measures to contain the emerging Corona virus (Covid- 19) Crude prices fell and public spending declined.
The institute added in a report that the public spending cuts adopted by the authorities in the region to contain the widening deficit "can offset losses resulting from lower oil exports and more." $ 144 billion, compared to 2.5% in 2019.
According to the data of the International Finance Institute, the region that recorded a surplus in its budgets during the past year of 88 billion dollars, may record a deficit of 33 billion dollars during the current year.
The report also expected the foreign exchange reserves of the six Gulf Cooperation Council countries to decrease by 133 billion dollars this year, bringing the total value of public foreign assets in these countries to 2.6 trillion dollars.
And Saturday, data for the Saudi Arabian Monetary Agency (the Central Bank) showed foreign reserves falling by 5.2% or $ 24.8 billion - on a monthly basis - until the end of last April, to reach $ 1682.4 billion riyals ($ 448.6 billion).
A solid banking system
According to the institute, the region's banking system remains solid thanks to strong liquidity and capital, and a relatively low quality of bad loans.
The institute added that the measures taken by the authorities of the Gulf Cooperation Council states to support liquidity with a view to strengthening banks amount to 4% of the gross domestic product, or $ 54 billion.
The Saudi central bank said yesterday that it will inject an additional $ 13.3 billion into the banking sector to help banks support the private sector following a sharp drop in consumer spending last April due to measures to contain the Corona virus.
The real GDP of Saudi Arabia, the largest economy in the region, may shrink by 4%, and the deficit will grow to 13% this year, according to Reuters.
The Institute of International Finance is a global institution with more than 470 financial institutions, and its mission is to support the financial industry and risk management, and includes in its membership the global central banks, major international banks, insurance companies, pension funds, asset managers and sovereign wealth funds.