Dubai: The economies of the six Gulf states are vulnerable to a further downturn in the global economy, though their copious fin-ancial reserves should help them mitigate the impact of a deeper economic crisis, the International Monetary Fund said yesterday.
The six nations of the Gulf Cooperation Council (GCC) would be particularly exposed to a deepening of the banking and sovereign debt problems in the advanced economies or to a slowdown in emerging markets, according to Masoud Ahmad, the IMF's director for the Middle East and Central Asia.
The subsequent decline in trade and tightening of global liquidity could have the same impact on the GCC countries as seen in 2008-2009, when the global economic crisis led to a sharp contraction in the region.
"GCC countries' broad international linkages make them vulnerable to spillovers from the global economy," Ahmad said in an e-mailed response to questions from Zawya Dow Jones.
Financial links
Ahmad said the most significant risk for the GCC states remains a prolonged decline in hydrocarbon exports and prices as a result of a slowdown in global trade.
But they are also vulnerable through their financial links to the developed countries. However, Ahmad said the GCC nations face the possibility of a global downturn from a position of strength.
"As was the case in 2008, buttressed by strong international reserve positions, GCC countries are in a good position to undertake countercyclical policies and financial sector support measures to mitigate the impact of the crisis, if needed," Ahmad said.
