IMF warns Gulf nations of weakened medium-term growth due to ongoing crisis

The economic and human expense of the illegal siege of Qatar, which began oin June 5, has been massive.

With no nations emerging as victorious in the standoff, concerns are being raised that prolonging the siege could damage medium-term growth of the countries involved in it.    

The International Monetary Fund (IMF) posted a warning that longer term economic growth could weaken in the Gulf region if the months-long diplomatic crisis remained unresolved, reported Al Jazeera.

In the IMF report published yesterday, the global financial institution said while the rift has a ‘limited impact’ on current growth, Qatar and its blockading neighbours face a ‘broader erosion of confidence’ from investors.

“A protracted rift could slow progress toward greater GCC integration, and cause a broader erosion of confidence, reducing investment and growth and increasing funding costs in Qatar and possibly the rest of the GCC,” the IMF warned in its Regional Economic Outlook.

However, the report also said that the Qatari economy and financial markets were ‘adjusting to the impact’ of the GCC crisis well, reported Gulf Times.

The initial concern that trade disruptions could affect the implementation of key infrastructure projects in Qatar has been mitigated by the availability of an inventory of construction materials and of alternative, and competitive, sources of imports, the report said.

In addition, it noted that Qatar was accelerating efforts to further diversify sources of imports and external financing, and to enhance domestic food processing. Some trade has been re-routed through Kuwait and Oman, and alternative food supply sources have been established, allaying fears of potential shortages.

The IMF also expected that Qatar’s GDP growth will reach 3.1% in 2018, compared to 2.5% in the current year, reported The Peninsula.