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The International Monetary Fund (IMF) has sharply pared back its growth forecasts for key Gulf economies, in its latest World Economic Outlook report, published this week. The downturn is a result of lower oil revenues and a global economic slowdown. It has cut its predictions for economic growth in Iran, Kuwait, Oman, Qatar, Saudi Arabia and the UAE for this year. The IMF is also forecasting lower growth than previously expected in 2020 in all those countries bar Kuwait.

The International Monetary Fund had some pointed – and diplomatically worded – advice for the kingdom in its latest Article IV review of the economy, released on 9 September. The Washington-based IMF said that non-oil growth was expected to strengthen to 2.9% this year as government spending and confidence increase, but overall GDP growth is projected to slow to 1.9% as oil growth dropped to 0.7% due to the agreement among Opec and other countries to limit output.

Given an unusual delay in the delivery of official figures, economists are struggling to work out how Oman fared in 2018 and what the impact was on the government’s finances. At this point in the year, official data for the preceding year would normally have been released, but the 2018 figures were not given to the International Monetary Fund during the IMF’s annual Article IV visit in late March/early April. Nor have they been published since by the Ministry of Finance or the National Centre for Statistics and Information.

In a positive economic development for the government, value added tax (VAT) takings have been stronger than expected. In a report that declared the UAE’s experience of VAT since January 2018 “credit positive”, ratings agency Moody’s Investors Service commented: “With non-oil sector growth still subdued, the strong VAT out-turn was largely attributable to higher than expected compliance with the new law.”

The Abu Dhabi emirate government launched another package of initiatives to spur on the local economy on 25 June – the latest in a string of efforts since the Dh50bn ($13.6bn) Ghadan 21 economic stimulus was announced in June last year. Despite further supportive measures since then, growth has been disappointing and Dubai-based Emirates NBD recently cut its GDP forecast for the UAE for this year from 3.1% to 2%, following weaker-than-expected growth last year, not least in Abu Dhabi.

The Central Bank of the UAE has cut its GDP growth forecast for this year to 2%, down from a figure of 3.5% it had been touting as recently as March. The bank expects non-oil GDP growth to rise from 1.3% last year to 1.8% this year, while the oil sector – hemmed in by production restrictions agreed via the Organisation of the Petroleum Exporting Countries – is predicted to grow by 2.7% this year, down from 2.8% in 2018.

In an early May report on the UAE economy, the International Monetary Fund found “some green shoots are now emerging” following slow growth last year. But while domestic credit growth, employment and tourist numbers have been improving, it noted oversupply in the real estate sector and urged the government to continue with reforms to boost the private sector, modernise the labour market and improve transparency.

The International Monetary Fund’s latest World Economic Outlook (WEO) report, released on 9 April, cut the IMF’s growth rate predictions for every country in the Gulf. This is due to a combination of weaker oil sector growth, geopolitical instability and the impact of slower growth in key global economies including China. Worst affected among the Gulf Co-operation Council countries was Oman.

A draft law seeking to impose 5% tax on expatriates’ remittances was approved by the National Assembly’s Financial and Economic Affairs Committee on 16 April. The bill on international money transfers was sent up to the assembly for approval. The controversial measure had been opposed in the assembly’s Legal and Legislative Committee and by the government and International Monetary Fund on the basis that it is illiberal and would hurt the economy. The Financial and Economic Affairs Committee countered that it was within the bounds of the constitution and should be allowed to continue.

Economic growth is faltering, according to the latest International Monetary Fund estimates, which make Oman the poorest performer among Gulf Co-operation Council countries. While the Fund’s previous World Economic Outlook, published in October, forecast that Oman would be the fastest-growing GCC economy this year, with 5% predicted GDP growth, the early April WEO slashed this to just 1.1%, making it the slowest-growing GCC economy. Oman’s economic problems are reflected by the big three ratings agencies, which have all lowered Muscat’s sovereign credit rating to ‘junk’ status.

The latest GDP figures released by the Dubai Statistics Centre show that the emirate’s economy grew by 1.9% last year, well below most forecasts; the local Emirates NBD bank had predicted 2.8%. This marks a clear slowdown from 2017, when the economy expanded by 3.1%, and was the lowest level of growth since 2010.There was sluggish growth in key areas, such as the economy’s largest sector, wholesale and retail trade (which accounts for 26% of total GDP), which grew by just 1.3% in 2018.

The European Union added the UAE and Oman to its blacklist of ‘non-cooperative jurisdictions for tax purposes’” on 12 March. The decision is a setback for the UAE, which had been included in the original list issued in December 2017 but which then successfully lobbied to be taken off the list the following month.Announcing its latest decision, the EU said the UAE “facilitates offshore structures and arrangements aimed at attracting profits without real economic substance and has not yet resolved this issue.”

Moody’s Investors Service downgraded the sultanate’s sovereign rating from Baa3 to Ba1 on 5 March, becoming the third of the big three ratings agencies to grade Muscat’s debt as junk. Standard & Poor’s and Fitch took similar steps in May 2017 and December 2018 respectively. Explaining its decision, Moody’s said Oman’s fiscal position was expected to deteriorate further in the face of moderate oil prices and the pressure on the government to maintain spending commitments “given its social stability objectives.”

The International Monetary Fund has cut its growth forecast for Saudi Arabia for this year to 1.8%, down significantly from the estimate of 2.4% issued in October. Others have taken a similar approach, with Dubai-based Emirates NBD revising down its Saudi growth forecast for 2019 from 2.4% to 2%, on the back of weaker oil sector growth following the decision by members of the Organisation of the Petroleum Exporting Countries (Opec) to again curb output from the start of this year.

Muscat is planning to spend OR12.9bn ($33.6bn) over the course of this year, OR400m more than forecast in the 2018 budget. According to local media reports, the budget is based on an oil price assumption of $58 a barrel, with total revenues forecast at OR10.1bn in 2019 The projected deficit of OR2.8bn is slightly lower than the OR3bn shortfall predicted in the 2018 budget.The government plans to borrow to cover most of the deficit, with OR2.4bn to be raised in international and domestic debt and the rest coming from withdrawals from reserves.