Speakers issue recommendations to support region’s economic growth

Gulf Today, Staff Reporter

Governments need to build resilience through fiscal policies to bolster economic stability against shocks, speakers told the annual Arab Fiscal Forum hosted at the World Government Summit 2023.

Speaking at the opening session of the Arab Fiscal Forum, Mohamed bin Hadi Al Hussaini, Minister of State for Financial Affairs, and Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), presented economic forecasts and proposed recommendations to strengthen economic resilience, support economic development in Arab countries and boost the framework for joint Arab action.

On the economic level, the speakers stressed on the need for fiscal policies to contribute to enhancing the stability of the economy and accelerating growth.

During his speech, Al Hussaini said this forum’s edition comes amid the repercussions of the increasing global economic slowdown in the Arab region, the rising inflation, disruption of supply chains, geopolitical challenges, high food prices, and pressured financial conditions in the wake of the fiscal stimulus.

Al Hussaini stressed on utilising fiscal policy tools to manage aggregate demand, continue to improve debt management, focus on financing through local markets, and draw development plans according to current global economic developments.

 Georgieva said the Mena region must have a robust framework to conduct fiscal policy and manage fiscal risks. “With today’s shock-prone and uncertain world the conduct of fiscal policy takes on added significance,” she said.

According to economic forecasts, Georgieva said inflation will likely to “remain contained” in the Gulf Cooperation Council (GCC) countries.

Inflation in the region is also expected to gradually decline “as commodity prices settle and tighter monetary and fiscal policies have their intended effect,” she said.

To build resilience, she urged countries in the region to boost tax revenues.

She also called for long-term planning and investment to address climate challenges and multilateral cooperation to tackle unsustainable debt.

Commending the collaboration among the Arab world, Ms. Georgieva said, “Over the past five years, GCC countries have provided $54 billion in financing for budget and balance-of-payments needs. They have also supported low-income countries, and fragile and conflict-affected states in the region, through debt reduction and food security support. This includes $10 billion in support announced by the Arab Coordination Group last year.”

She added, “Donor countries can further support regional economic stability and growth through multilateral initiatives.”

Al Hussaini noted that the UAE has provided loans and development aid to developing countries during the period from 2012 to 2022 at a value of Dhs 255.5 billion (an average annual rate of 2% of the GDP), benefitting 148 countries around the world. This falls within the framework of the country’s policy aimed at supporting economic reform programmes and contributing to the implementation of development projects in Arab and non-Arab countries.  Additionally, through the Arab Coordination Group, Arab countries have provided $245 billion until the end of 2022 in aid to developing countries.

He said: “The economic recovery is gaining momentum, thanks to the UAE’s early and strong response and the continuous macroeconomic policies. This is in addition to the strong reform efforts within the framework of the country’s 2050 strategy to encourage the private sector growth, promote non-oil growth, and attract foreign investment.”

His Excellency noted that taxes are an effective tool that has a significant impact on economic growth, as they are one of the sources of financing the budget and diversifying economic activity. As such, in December 2022, the UAE issued a law on introducing corporate tax, which will be effective from 01 June 2023. Corporate tax facilitates enabling financial planning in the medium and long term, helps achieve the sustainability and stability of the federal budget, and maintains growth rates.

At the end of his speech, Al Hussaini reaffirmed the UAE’s keenness to exchange multifaceted developmental expertise and experiences with various countries, through which the country was able to achieve real economic growth estimated at 5.9% during 2022 compared to 4.7% in 2021 (according to the World Bank report). Additionally, the UAE’s non-oil GDP increased by 6.1% in 2022, and the volume of non-oil foreign trade has risen to more than AED 1 trillion in the first half of 2022.

He stated that the UAE’s pioneering commercial and economic policies and initiatives have resulted in achieving unprecedented achievements in global competitiveness indices. The country ranked among the top 10 countries in more than 28 of the most prominent indicators of global competitiveness for the year 2022 in various sectors of finance, economy, trade, communications, information technology, and investment.

The 7th Arab Fiscal Forum was organised by the Ministry of Finance (MoF), in partnership with the Arab Monetary Fund (AMF) and the IMF. The forum was held under the theme: “Fiscal Sustainability in the Arab World beyond the COVID-19 Pandemic: Challenges and Opportunities”, and it was organized on the sidelines of the 2023 edition of the World Government Summit (WGS 2023).