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International Monetary Fund. Middle East and Central Asia Dept.
This paper on the Gulf Cooperation Council (GCC) discusses economic prospects and policy priorities for the GCC countries. A comprehensive package of policies should be implemented to respond to near-term shocks and uncertainty and to firmly address medium- and long-term challenges. In the near term, fiscal policy should remain prudent, avoiding procyclical spending and using the windfall from higher oil prices to rebuild buffers. Targeted and temporary fiscal measures could be undertaken to respond to shocks, if they materialize. In the medium term, GCC countries should continue pursuing fiscal consolidation consistent with ensuring intergenerational equity and sustainability, supported by a credible rules-based medium-term fiscal framework. Continued financial sector reforms are needed to support growth and stability. Structural policies should continue focusing on diversifying the economies away from hydrocarbon. Reform efforts aimed at further enhancing product market regulations, labor markets, and governance will spur growth, as will efficient investments in digital and green initiatives to accelerate transformation and support energy transition. The industrial policy should be carefully calibrated and not substitute for structural reforms while minimizing related inefficiencies.