The Gulf Cooperation Council (GCC) economies are expected to slip into a recession in 2009 as a result of the severe deterioration in the global economic scene, a National Bank of Kuwait (NBK) report said.
The report entitled 'GCC: Fiscal stimulus and reforms are optimal choice under current circumstances', however, said that the GCC economies were "well positioned to face the storm".
"The dominance of their public sectors in economic activity should provide a measure of stability, including on the employment (of nationals) front.
"More importantly, all GCC countries have the capacity to pursue expansionary fiscal policies without putting pressure on their financial positions, thanks to the large surpluses of previous years," it said.
The report added that the rationale for using fiscal stimulus is to have higher government spending offset the decline in private consumption and investment.
"The latter have been negatively impacted by the bursting of the equity and real estate market bubbles, resulting in massive wealth destruction. In current circumstances, monetary measures alone are likely to prove inadequate to stimulate private demand."
