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Domestic debt markets key to strengthen Gulf economies: IMF

October 2015

October 22, 2015 | 13:00 | Dubai

Although the GCC countries’ debt markets are at an early stage of development, developing and deepening local currency liquid domestic debt markets can strengthen the resilience of these economies to adverse shocks, the IMF said in its latest Regional Economic Outlook for Middle East and Central Asia.

An actively traded government bond market in the GCC region could provide a base from which to price local currency corporate bonds and help address maturity mismatches that restrict long-term bank lending, the Washington-based institution said.

The domestic corporate bond market is almost non-existent. In July 2015, Saudi Arabia, for example, issued its first sovereign bonds since 2007 to local banks to finance its fiscal deficit, and Oman and Kuwait are planning a Sukuk issuance. That said, the local currency debt issuance in the GCC countries has yet to translate into adequate secondary market liquidity, and only Qatar has made systematic progress in the development of its government securities market in recent years

The IMF however expects in inflation In the GCC region to ease slightly from 2.6% in 2014 to 2.4% in 2015. Growth in the GCC is expected to slow in the short term as countries initiate fiscal consolidation, it added. Non-oil growth is projected at just below 4% for both 2015 and 2016, as fiscal adjustment, or the anticipation thereof, begins to have effects, notably in Saudi Arabia and the UAE, it said.

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