International Monetary Fund research papers urge Guf countries to continue to diversify economies
Recent volatility in oil prices is underscoring the need for Gulf counties to continue reforms to diversify economies and encourage strong, and inclusive growth, according to the International Monetary Fund (IMF).
Two IMF papers say greater openness to trade and foreign investment and more developed and inclusive financial sectors can help attain these goals.
One report said foreign trade in the GCC has been expanding robustly, though with limited non-oil exports but foreign direct investment inflows have stalled in recent years despite measures to reduce red tape and provide incentives.
The IMF said greater openness to trade and foreign investment can lead to higher growth in the GCC by creating jobs, enhancing productivity with new technologies, promoting knowledge, and creating a more competitive business environment.
Closing regional gaps in foreign direct investment and exports could have a significant impact of up to one percent increase in real, non-oil per capita GDP growth, it said, adding that promoting exports by reducing non-tariff barriers could add a further 0.2-0.5 percent.
A second IMF report said financial systems in the GCC have developed significantly over the last few decades, but there is further room for progress.
It said GCC countries have also made progress on financial inclusion - making financial services more widely available to everyone in society - but gaps remain in some key areas, particularly access to finance for small and medium enterprises (SMEs), women, and youth.
The IMF said reforms to strengthen access to finance for SMEs, women, and youth, including promoting competition in the financial sector, enhancing financial literacy, and improving SME governance would all benefit growth.
It added that developing debt markets and further stock market reforms would help foster financial sector development, as well as development of non-bank financial institutions, such as investment firms.