Gulf Arab oil exporters are expected, on average, to put away about 33 percent of their oil revenues over 2022-26, which will lead to an overall improvement in the financial balance, according to the International Monetary Fund (IMF).
The IMF said in its latest report that higher oil and gas prices are expected to increase the average current account surplus in the six states Gulf Cooperation Council (GCC) to 9.7 percent of GDP in 2022, up from 4.6 percent of GDP last year, leading to an additional surplus of $275 billion.
"Many (Gulf states) confirm that this time they will stick to their (fiscal discipline) plans...The proof is going to be in the pudding. Always you have temptations to go pro-cyclical," IMF Middle East and Central Asia department director Jihad Azour told Reuters.
"Oil exporters must increase and strengthen their buffers and use this moment as a litmus test for sustainable diversification."
Middle East oil exporters are expected to outperform peers, with projected growth at 5.2 percent this year following 4.5 percent growth in 2021, boosted by high oil prices and robust non-oil GDP growth offsetting rising global interest rates and high food prices.
The Fund's report indicated that growth is expected to moderate to 3.5 percent in 2023 as oil prices decline and global demand slows.
The Fund expects Saudi Arabia to achieve 7.6 percent growth this year, slightly less than the government's eight percent forecast and up from 3.2 percent in 2021.
The Kingdom's oil sector growth was seen falling to 3.3 percent next year, from 13.1 percent in 2022, while non-oil GDP is forecast at 3.8 percent in 2023 versus 4.2 percent this year.
"Our policy recommendations for Saudi as well as for other oil exporting countries is to keep the path of reforms that helps diversify the economy, improve productivity (and) avoid pro-cyclical policies," Azour said.
He added that the non-oil sector is growing in Saudi Arabia, the UAE, and other Gulf countries, with new sectors opening and attracting investment, while the financial sector is "well-capitalized, profitable, and strong."
Azour urged increased efforts to diversify economic activities and legislative reforms to increase productivity and enhance infrastructure to support private sector growth.
More broadly, the Fund said that economic activity in the Middle East and Central Asia was resilient, with recovery continuing in 2022. However, the region must guard against growing global headwinds and push ahead with reforms.
While crude exporters benefit from an oil windfall projected to accrue a cumulative $1 trillion over 2022-2026, emerging market and middle-income states face deep terms-of-trade shock and curtailed access to market financing.
Azour said ahead of the October report that countries should be on alert as "headwinds are growing, vulnerabilities are growing" with a global economic slowdown, volatile food, and energy prices, and tightening financial conditions.
He said the region needed to "act now, act fast and act in a comprehensive way" on structural reforms and that oil exporters should use this opportunity to strengthen their buffers.
An urgent policy challenge was tackling the cost-of-living crisis by restoring price stability, protecting vulnerable groups through targeted support, and ensuring food security.
The report said "higher food prices and more pervasive food and energy shortages could lead to food insecurity and social unrest, particularly in 2023," warning of broad-based inflation.
In the Middle East and North Africa, GDP was forecast to grow five percent this year, up from 4.1 percent in 2021 and then expected to slow to 3.6 percent in 2023 due to worsening global conditions. Inflation was put at 12.1 percent in 2022 and 11.2 percent next year.
Higher interest payments and increased reliance on short-term financing in some emerging markets and middle-income countries such as Egypt, Pakistan, and Tunisia were expected to raise gross public financing to $550 billion over 2022-23, which is $22 billion above the earlier period.
