The Managing Director’s Remarks at GCC Ministerial Meeting HTML File

The Managing Director's Remarks at GCC Ministerial Meeting

October 2, 2025

International Monetary Fund (IMF) Managing Director Kristalina Georgieva made the following remarks today during the Meeting of the Ministers of Finance and Central Bank Governors of the Gulf Cooperation Council (GCC) in Kuwait on "Enhancing GCC Resilience to Global Shocks":

Assalamu alaikum! Ministers, Governors, and GCC Secretary General. I am pleased to be back for the Annual GCC ministerial meeting. I'd like to thank Minister Almukhaizim for hosting us in Kuwait ahead of our Annual Meetings in Washington!

The last time we saw each other was during the Spring Meetings six months ago. At the time, trade tensions brought global uncertainty to new highs, contributing to a downward revision in our global growth projections.

Since then, a series of trade agreements and pauses in tariff increases have prevented escalation. Almost all countries subjected to US tariffs have refrained from retaliating. This, combined with the fact that the rest of trade relations among countries remain guided - so far - by WTO rules, allowed us to avoid a full-scale trade war.

In addition, the private sector has shown impressive agility and adaptability, front-loading cross-border purchases, adjusting supply chains and pursuing investment strategies aligned with a more complex global environment. And access to finance has eased both for the public and the private sector. As a result global growth prospects are better than feared during our last meeting in April.

Yet they are still worse than pre-COVID and the world economy remains in flux. Major transformational forces are in play, from geopolitics to trade relations, technology and demography, producing new opportunities but also new risks. They steer anxiety in societies and complicate the job of policymakers. Navigating uncertainty is becoming the new normal.

In this environment risks to the global outlook remain tilted to the downside. Protectionism could lead to escalation of trade tensions, with negative impact on supply chains. Erosion of confidence could constrain consumption and investment. Shocks to labor supply, including from changing immigration policies, could lower growth, especially in countries with aging populations.

The outlook is not homogeneous - while some parts of the world are slowing down, others do better. Growth is expected to accelerate in the Middle East and Central Asia as global headwinds are offset by an increase in oil production, and structural reforms pay off.

As for the GCC, a year ago I said that the GCC "remains a bright spot despite the numerous shocks." Since then, global uncertainty has increased, including related to shifts in the global trade system, while oil prices have declined and geopolitical tensions have intensified.

Yet, despite this increasingly challenging environment, the GCC continues to deliver strong and steady performance and is still a bright spot in the world economy. You, the finance ministers and central bank governors of the region, deserve credit for the strong reform momentum underlying this. It is making the GCC more resilient, as evidenced by limited spillovers from tensions and conflicts in the region.

The impact of higher U.S. tariffs on GCC economies has been modest, with exports to the United States ranging from just 0.1 percent of total exports for Kuwait and up to 8 percent for Bahrain. Against this backdrop, we now expect overall GCC growth to accelerate to a 3-3.5 percent range in 2025 and close to 4 percent in 2026, supported by the resilience of the non-hydrocarbon economy, the unwinding of voluntary oil production cuts, and the expansion of natural gas production.

Over the medium term, non-hydrocarbon activity is set to remain strong on the back of ambitious reform efforts facilitated by ample policy buffers-both official reserves and those available through sovereign wealth funds. This activity is expected to offset the impact of lower oil prices.

But there are risks to this outlook. Oil prices and revenues could be negatively affected by weaker oil demand, driven by elevated economic uncertainty, an escalation of global trade tensions, or deepening geoeconomic fragmentation. Additionally, a potential supply glut may emerge as OPEC+ continues to unwind voluntary oil production cuts at a time when demand remains weak.

In a downside scenario where oil prices temporarily fall to $40 per barrel, non-hydrocarbon GDP growth in the GCC could slow by 1.3 percentage points, while fiscal deficits could rise significantly. In addition, high global uncertainty could lead to tightening of financial conditions and lower FDI, thereby threatening the economic diversification agenda. Over the medium term, the outlook remains subject to two-sided risks related to ongoing global structural shifts, such as the energy transition, potential global fragmentation, digitalization and the use of AI.

Key messages for GCC policymakers

In this environment, the policy objectives to enhance resilience and accelerate economic diversification become even more important. In this regard, I would like to focus my remarks on four key priority areas:

• First, fiscal policy must remain prudent-striking a balance between supporting non-hydrocarbon activity and economic diversification, while ensuring long-term sustainability. Over the past two years, several GCC countries have undertaken a welcome reprioritization and recalibration of their spending priorities, helping reduce the risk of economic overheating.
• A modest tightening of fiscal policy, in the context of lower oil prices and moderate government debt-despite some increases to finance priority projects-remains appropriate and has been positively received by markets. Oman, for example, saw its credit rating upgraded to investment grade by two rating agencies.
• The region has clearly learned from past experiences, with fiscal policy becoming less procyclical. It is now more important than ever to anchor spending decisions within a medium-term framework and to avoid overreacting to lower oil prices through abrupt adjustments in expenditure plans.
• Yet, looking ahead, to ensure intergenerational equity, further consolidation efforts are needed, with their size ranging from 6 to 18 percent of non-hydrocarbon GDP. This could involve mobilizing non-hydrocarbon revenue-which remains about 10 percent of GDP below emerging-market peers-and rationalizing expenditures while preserving critical public investment and well-designed social-safety nets. Such efforts would also be rewarded by investors: our analysis shows that a 1 percent of GDP fiscal adjustment tends to be associated with an 8-basis-point reduction in GCC sovereign spreads.
• Second, true economic diversification hinges on a dynamic private sector. Impressive strides have been made in this aspect, as five GCC countries now rank among the 30 most competitive economies. A case in point is AI: the GCC's AI preparedness exceeds that of an average EM thanks to recent rapid advancements in AI investments, R&D, and the attraction of talent. But further progress is needed.
• In addition, partnerships with global tech companies could help further develop the digital infrastructure and facilitate the crowding in of FDI and know-how. Therefore, the region is well-positioned to leverage the productivity-enhancing potential of AI. In Saudi Arabia, for instance, AI could raise labor productivity by 5 percent over the medium term.
• Finally, the GCC's comparative advantage in terms of access to energy is helping it unlock major projects to host data centers. Examples include partnerships with Humain and Nvidia in Saudi Arabia, Blue Owl Capital in Qatar, or the US-UAE AI accelerated partnership.
• Third, deeper domestic financial markets-particularly through developing local bond markets-are essential to unlock long-term capital for investments and enhance the resilience of diversification strategies to oil price volatility and foreign investor uncertainty. The potential for deepening markets is significant. For example, the volume of outstanding local currency bonds in the GCC is on average 1.8 percent below potential. Enhancing issuance strategies, broadening the institutional investor base, and addressing structural impediments, such as low liquidity and infrastructure gaps (e.g., settlement systems) would greatly support this effort.
• Likewise, expanding private sector credit-currently less than half the average of advanced economies in terms of GDP-will be critical to advancing the diversification agenda, especially by improving access to finance for SMEs. Prudent fiscal policy and strengthened debt management, combined with enhanced credit-information systems, streamlined insolvency procedures, and improved reporting of financial statements, can contribute to expanding credit supply to the private sector.
• Greater financial integration, including by harmonizing regulations and coordinating supervision across GCC countries, would also enhance financial market deepening and benefit the region.
• Finally, trade integration must remain a top priority. Last year I talked about intra-GCC trade-this time, let me add that strengthening relations with key trading partners outside the region is also an important For instance, trade between Africa and the GCC has doubled over the past few years, exceeding $100 billion, but constitutes only 7-9 percent of total GCC trade. In this regard, the streamlining of non-tariff barriers, including in the context of trade agreements negotiated at country- or GCC-level, could play an important role.

How can the IMF work with you?

Let me conclude with how the IMF can work with you.

We have an excellent partnership for capacity development in the MENA region through the Center of Economics and Finance in Kuwait and the Regional Office in Riyadh. This partnership benefits from generous contributions from Kuwait and Saudi Arabia. We look forward to deepening this partnership with the GCC countries to respond to the capacity development needs of the broader MENA region, particularly post-conflict countries such as Syria.

Our partnership has also been benefiting from Saudi Arabia's IMFC Chairmanship. Minister Al-Jadaan, I would like to express my sincere gratitude again for your exemplary leadership at the IMFC.

Finally, we very much appreciate the financial support provided by the GCC to support Fund facilities and help countries most affected by global and regional developments. There is an Arabic proverb: Fī al-ittiḥād quwwa: in unity, there is strength. In the coming period, we will continue to look for ways to deepen our collaboration and better support our members-particularly those recovering from conflicts.

Thank you very much. Shukran Jazilan.