Governments across the Middle East are responding to political developments — and higher commodity prices — with expansion of fuel and food subsidies, civil service wage and pension increases and additional cash transfers, tax reductions, and other spending increases.
According to the latest regional economic outlook published by the International Monetary Fund (IMF), the size of the national fiscal packages in 2011 in countries across the region ranges from less than 0.5 per cent of gross domestic product (GDP) in some of the oil importing countries to about 22 per cent in Saudi Arabia.
For most Gulf countries, the expected increase in oil prices from $79 (Dh290) per barrel to $107 per barrel and production volumes will lead to higher growth in 2011 and stronger fiscal and external balances, notwithstanding recent increases in government spending. Despite being in such a fiscal comfort zone, the GCC must pay close attention to long-term fiscal policy objectives, Masoud Ahmad, Director of the IMF's Middle East and Central Asia Department, told Gulf News in a recent interview.
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