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Recession is over, declare GCC finance chiefs

Gulf finance ministers claim the region has emerged from recession, but suggest fiscal stimulus programmes must not yet be cut.

Finance ministers and central bank governors from all six GCC states also urged those who have yet to ratify an agreement on monetary union to do so by year end.
The meeting in the Omani capital was meant to set the agenda for a rulers' summit in Kuwait later this year and comes as the region's economies show signs of bouncing back from the crisis, helped by rising oil prices.

When asked if Gulf states should begin easing back the throttle on government spending, Saudi Arabian Monetary Authority Governor Muhammad Al Jasser told reporters: "Not yet. Not necessarily. "The pulling out depends on the pace of the recovery in each country and the pace is not the same in all countries," he added. "So the pulling out of the stimulus has to be synchronised with the recovery pace in each country."

Jasser also said Saudi Arabia's economy was recovering. "Our stimulus is mostly for oil production capacity enhancement and also large development projects we're implementing. When these projects are finished, then we will reassess the need for additional spending," he said.

Oman's central bank, which allocated about $2 billion to local banks to provide dollar liquidity last November, said it will keep the fund - which it said still has about $1.7 billion in it - as a buffer but did not see much further demand on it.

"The global financial crisis is receding and the activities are coming back to normal soon," Oman central bank head Hamood Sangour al-Zadjali said.

"Since our banks aren't dependant on foreign markets, I don't think there'll be much demand, but we are still keeping this as a buffer."

A UAE newspaper said last week that the finance ministry had delayed the final $5.45 billion tranche of a liquidity injection plan because UAE banks did not currently need it.

IMF head Dominique Strauss-Kahn said the GCC is faring better than other economic blocs.

"The GCC has not been immune to the crisis... but the situation is much better than elsewhere in the world," he told reporters. "The crisis has revealed vulnerabilities in some GCC banking sectors which need to be addressed. Nevertheless, these... are of a non-systemic nature and the GCC countries have deployed the necessary resources to keep them contained," he said in a separate statement."

Delegates at the two-day meeting also agreed to call for Bahrain, Qatar and Kuwait to ratify the single currency project. Ratification by the four remaining countries is needed for the project to go ahead, but so far only Saudi Arabia has done so, leaving question marks over the future of the project.

Only four of the GCC states are taking part in monetary union after the United Arab Emirates opted out in May, three years after Oman did the same. "The GCC countries have asked those who have not ratified the single currency to do so by the end of the year," Darwish Ismail Al-Balushi, secretary general in the Oman finance ministry, told Reuters.

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