Dubai: The International Monetary Fund (IMF) has called on the Gulf Cooperation Council states, which include the UAE, to “reign in their spending” as oil prices collapse.
Harald Finger, the IMF’s head of mission for the UAE, speaking at the UAE Economic Outlook Forum in Dubai on Tuesday, said most GCC countries should trim spending at a gradual pace, to avoid hurting the economy, but be “mindful of social implications.”
“The current model where growth in government spending tends to drive the expansion in the non-oil economy is not going to be sustainable with low oil prices,” he said to an audience that included senior UAE economic officials.
Oil prices have crashed since June by almost 50 per cent amid a global glut driven by weaker demand out of Europe and China and increased production in the United States.
Finger said the Gulf states have significant assets and currency reserves that will be able to prop up the economies for the time being, however, warned the UAE is already at risking of having to use its foreign assets.
In a slide of his presentation, Finger noted that rising domestic energy consumption in the Middle East is reducing some pressures on the global oil surplus.
