Manama: The global economy has stabilised somewhat in the first three months of the year after an exceptionally stressful start for global financial markets, according to the Economic Development Board (EDB).
The EDB’s Bahrain Economic Quarterly (BEQ) report released yesterday said the move to stability was helped by renewed moves towards looser monetary policy by leading central banks.
Also the Chinese authorities have reaffirmed their commitment to ambitious growth targets, thereby dispelling some of the uncertainty that weighed on investors earlier, it added.
Moves toward freezing oil production globally have led to some stabilisation of oil prices even as worries about excess supply persist.
The near-term outlook is likely to be determined, to a large extent, by the ongoing efforts by leading Opec and non-Opec producers to establish a ceiling for production, the report said.
The EDB said GCC economies are re-engineering their fiscal models and encouraging greater participation by private capital in driving growth.
A longer-than-expected period of depressed oil prices is prompting new measures to diversify government revenues and rationalise expenditures.
Forward-looking indicators point to continued expansion in the regional non-oil economy.
Efforts to curb government spending are coinciding with regulatory reforms and a greater willingness to embrace public-private partnership-type structures.
Also, sales of government assets are under consideration in many countries.
A range of new fiscal reform initiatives are being introduced across the GCC countries.
Most of the GCC governments have removed subsidies on fuel products.
According to Moody’s, the GCC will save approximately 0.5 per cent of GDP – around $7bn – this year from increased fuel prices.
Across the GCC, efforts are underway to prepare for the introduction of a value added tax (VAT).
The tax is expected to have a basic rate of 5pc and, while the details of implementation are still pending, it is clear that sectors such as healthcare and education will be exempted from the tax.
Across the region, the new tax is expected to boost fiscal balances by an estimated 2.5pc of GDP.
Credit growth in the GCC, says the report, has remained strong even with loan-to-deposit ratios edging up and funding structures changing.
Regional stock markets have rebounded somewhat from the depressed levels seen around the turn of the year.
Sovereign issuance has continued to dominate regional fixed income markets, especially in the conventional space.