(MENAFN - Arab Times) A rapid growth in US oil production combined with potentially weaker global demand present a downside risk to Gulf oil output and prices, the International Monetary Fund warned Tuesday. But despite an expected drop in their current account surpluses, most Gulf Cooperation Council economies continue to have "substantial buffers" to cope with short-lived price shocks, the IMF said in its World Economic Outlook. And economic growth in most of the oil-rich GCC economies is to hover near the rates registered last year, with Saudi Arabia's largest Arab economy expanding by 4.1 percent in 2014, compared to 3.8 percent in 2013, it said. Kuwait's economy will grow 2.6 percent this year and 3.0 percent in 2015 after growing by just 0.8 percent last year
"Faster-than-expected growth in the US oil supply and lingering risks of weaker-than-expected global oil demand because of a slowdown in either emerging markets or advanced economies present downside risks to oil prices and GCC production," it said. The GCC comprises top oil exporter Saudi Arabia, as well as Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. US oil output has been rising fast on the back of the newly-tapped shale-based reserves. OPEC oil cartel said last month that supply from non-members is expected to increase by 1.31 million barrels per day this year, mainly from the United States, Canada and Brazil. Large current account surpluses in Middle East and North Africa oil exporters are expected to decline in 2014 "because of lower oil revenues," the IMF said.
"Alhough fiscal positions have been weakening across the GCC economies over the past several years, most still have substantial buffers to withstand large shocks to oil prices, provided the shocks are short lived," it said. Those countries adopted expansionary fiscal policies to fend off the impact of the global financial crisis in 2008, channelling some of the oil windfall into infrastructure projects. "Policy priorities continue to be centred on diversifying these economies to reduce dependence on oil, increase employment opportunities in the private sector for nationals and enhance resilience to shocks," the IMF said
"Reforms to foster entrepreneurship, along with public wage and employment restraint, are key," it added. Economic growth in the UAE is expected to be around 4.4 percent and 4.2 percent in 2014 and 2015 respectively, compared to 4.8 percent last year, the IMF said. Dubai's winning of the right to host World Expo 2020 has further strengthened growth prospects in the UAE where real estate prices are rising at a "fast pace," the IMF said. Dubai's property sector had nosedived due to the global financial crisis, following five years of rapid growth. But the sector has made a strong comeback as investors flocked back in the emirate that is perceived as a safe haven amid regional turmoil. Growth in gas-rich Qatar will ease slightly from 6.1 percent last year to 5.9 percent in 2014, picking up again in 2015 at 7.1 percent. The emirate is expected to spend billions of dollars on infrastructure projects in preparation for the football World Cup tournament in 2022