​GCC: The IMF's gloomy forecasts may still be too optimistic

GULF COUNTRIES - Report 16 Apr 2020 by Justin Alexander and Rory Fyfe

* Markets were shocked by the IMF’s “Great Lockdown” forecasts this week, but its GCC outlook looks too optimistic in certain regards, although it is a valuable benchmark.
* The GCC’s non-oil contraction in 2020 (-4.3%) is in line with the global COVID shock, although the IMF warns of “extreme uncertainty” about the duration and secondary impacts of the pandemic.
* However, it assumes flat oil output, as the forecasts presumably predate the OPEC+ deal. This means that the overall real GDP contraction is likely to be larger than the -4.3% forecast.
* The exaggerated oil output also means that deficits in 2020 will be worse than the IMF assumes (-10% of GDP), if its oil price assumption holds ($36). Conversely, the IMF fiscal forecasts are pessimistic for 2021 because they are based on an oil assumption of $38, whereas most expect something closer to $50.
* The IMF also likely underestimates the growth in external debt ($27bn in 2020).

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