UAE- Iran opening positive news for global economy: IMF

10/22/2015 11:50:06 PM

(MENAFN- Khaleej Times)

The International Monetary Fund (IMF) on Wednesday said the recent agreement to remove most economic sanctions on Iran will be net positive news for the global economy.

The Iran's return to the global oil market is expected to result in increased global supply of oil and the removal of the sanctions will open up new trade and investment opportunities the IMF said in its latest report issued in Dubai.

"With the easing of international sanctions the country's economic prospects have improved substantially and through increased trade and investment benefits are expected to flow to its economic partners as well" IMF Middle East and Central Asia Department director Masood Ahmed said on Wednesday.

The IMF report said traditional economic partners such as Europe Turkey and the UAE stand to gain as do China and India whose trade with Iran increased during the sanctions period. It also projected that the CCA countries could also benefit especially if over time they become transit hubs for increased trade between Iran Asia and Europe. "The country's growth could reach four per cent in the medium term or even higher if the easing of sanctions is accompanied by domestic economic reforms to ensure macroeconomic stability and promote inclusive growth" Ahmed said. He said Saudi government is looking at a wide range of possible adjustments to its spending and revenue policies to cope with the blow to its finances from cheap oil.

The IMF estimates Riyadh faces a record budget deficit of well over $100 billion this year amounting to 21.6 percent of gross domestic product as low oil prices slash the revenues of the world's largest crude exporter. "It is very clear that Saudi Arabia needs a sizeable structured multi-year fiscal adjustment" Ahmed said.

The IMF report said Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies. The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council it added. "Kuwait Qatar and the UAE have relatively more financial assets that could support them for more than 20 years" the Washington-based lender said. Ahmed said fund may offer a bigger loan to Iraq next year to help stabilise the country's finances as it grapples with low oil prices and militancy.

"The IMF is planning to send its teams to Jordan and Iraq soon for talks that may lead to more aid for the two countries" he said.

"Jordan has asked for another loan programme and the fund hopes to conclude talks with the kingdom in the first quarter of next year" he said.

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