IMF Backs Saudi Arabia, Gulf Spending Cuts With Growth to Slow - Bloomberg Business

IMF Backs Saudi Arabia, Gulf Spending Cuts With Growth to Slow - Bloomberg Business:

"Cutting government spending and reducing subsidies are necessary steps for oil-rich Gulf nations to adjust to the “new reality” of lower crude prices, though they will also squeeze economic growth in the short-term, according to the International Monetary Fund.
The IMF warned in October that Saudi Arabia, Oman and Bahrain risked draining financial assets within five years if governments maintained their existing spending. All three have since cut energy subsidies after years of debate, while Saudi Arabia has also reduced support for water and electricity and is considering new forms of taxation and privatizing state assets, including an initial public offering for state-run Saudi Arabian Oil Co.
Saudi Arabia’s fiscal consolidation has been more ambitious and speedier "than what had been anticipated earlier, and one of the consequences will be to see dampening effect on non-oil growth," the IMF’s Middle East chief Masood Ahmed said in a phone interview. Non-oil economic growth in the kingdom is expected to slow to about 1 percent this year and just over 2 percent next year, compared with 3.5 percent in 2015, he said.
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