IMF: GCC countries to record surplus of 3.6% in current account, exceed pre-pandemic levels

Oil exporters, particularly GCC countries, will benefit from the recovery in global demand, higher oil prices, and wider vaccine coverage than most other countries, according to the International Monetary Fund (IMF) updated regional economic outlook.

Vaccination rates for all GCC countries have already reached 40 percent of their populations and are expected to cover 70 percent by the end of 2021.

Higher oil prices and exports are expected to strengthen oil exporters’ external positions, with their current account balance projected to move from a deficit of 1.9 percent of GDP in 2020 to a surplus of 3.6 percent of GDP in 2021 (above the pre-pandemic level). This surplus is expected to decline gradually over the medium term in line with the projected stabilization in oil prices, the report said.

Gross official reserves are expected to increase by $95 billion to almost $1 trillion in 2021, an upward revision of more than $100 billion since April.

Fiscal deficits are expected to decline; starting from 2021, reflecting the ongoing recovery, higher oil prices, expiring measures, and consolidation efforts. Nonetheless, government debt as a share of GDP, while declining relative to peaks reached during the crisis, will likely remain higher than its pre-crisis level over the medium term. As a result, public gross financing needs are projected to remain elevated at $473 billion overall during 2021–2022, compared to $310 billion during 2018–2019.

Real GDP is projected to expand by 4.5 percent in 2021 (2.8 percent excluding Libya) and 4 percent in 2022, reflecting a rebound in both oil and non-oil GDP.

Oil activity is expected to expand by 5.3 percent and 4.4 percent in 2021 and 2022, respectively, reflecting a surge in oil production in Libya and a gradual expansion in supply among OPEC+ countries after August 2021. Vaccine rollouts and higher oil prices will also support confidence and activity in the non-oil sector, which is set to expand by 3.9 and 3.4 percent in 2021 and 2022, respectively. Over the medium term, real GDP losses are expected to be more contained for oil exporters than other groups.

The report has also expected that the inflation is projected to rise to 10.5 percent in 2021 and moderate to 8.0 percent in 2022 (an upward revision of 0.3 percentage points in both years). High inflation is mainly driven by non-GCC oil exporters, with inflation in the GCC countries peaking at 2.8 percent in 2021.