Gulf economies to contract, says IMF

The Gulf’s largest economies are expected to contract this year as Opec-mandated cuts in oil production and declining petroleum revenue erode growth.

The International Monetary Fund said on Sunday that real gross domestic product in Saudi Arabia, the United Arab Emirates and Kuwait would shrink after a slump in oil prices spurred the cartel to reduce output – the region’s main export and source of government revenue.

Until oil prices plunged last autumn, the Gulf had seemed relatively immune to the financial crisis. It has soaring oil revenues, big currency reserves and a financial sector largely unpolluted by toxic securities. But the worsening of the financial crisis last autumn sent oil prices tumbling and abruptly ended hopes that the region could decouple from the economic woes of the west.