Georgieva to Arabic: Iran's War Redraws the Map of the Gulf Economy.. and Oil Remains High in 2027

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IMF Director: Saudi Arabia will increase oil production and exports next year.. and diversification investments in export routes will enhance its ability to face Hormuz disruptions.

IMF Director Kristalina Georgieva confirmed that the Iran war has opened many areas for economic cooperation between Gulf countries, noting a clear disparity in the war's impact on the region's economies.

Georgieva stated in an interview with "Al Arabiya Business" that the biggest challenge facing the countries in the region currently is how to regain the strong momentum their economies enjoyed before the war, focusing on optimally utilizing their financial capabilities and continuing reforms that enhance growth.

The IMF praises the resilience of Gulf economies and their ability to face challenges.

Georgieva clarified that Saudi Arabia will strongly benefit from its previous investments to diversify oil export routes, considering that these investments gain special importance in light of the disruptions in supply movements through the Strait of Hormuz.

She added that Gulf countries' investments in transporting oil away from Hormuz remain important even if the strait is permanently reopened, noting that diversifying export routes enhances the economies' ability to withstand future shocks.

Georgieva expected an increase in Saudi oil production and exports during the next year, even if the war continues.

The IMF director stated that oil prices will remain high in 2027 even if the war ends, due to the need to rebuild reserves that were drawn down during the crisis.

She added that countries will rush to refill energy stocks as a result of the experience they went through during the war, which may keep demand for oil high.

It pointed out the continued global price pressures due to the oil supply shock, noting that the impact of the crisis was particularly evident in Jordan and Egypt as they are oil-importing countries.

Georgieva confirmed that the impact of the Iran war varies from country to country, indicating that Iraq, Kuwait, and Bahrain are among the economies most affected by the war's repercussions, but for different reasons.

On the other hand, she stated that Gulf countries have been able to overcome many obstacles thanks to their previous investments in diversifying their economies, emphasizing that Saudi Arabia will continue to diversify its economy and increase its vitality.

She added that the war has simultaneously opened many areas for economic cooperation among Gulf countries, enhancing opportunities for joint work in facing the repercussions of regional shocks.

Georgieva said that the International Monetary Fund agrees with Saudi estimates regarding a leap in economic growth by 2027.

The global economy is expected to grow by about 3% this year, while economies continue to face the repercussions of war, energy shocks, and rising debt levels.

Georgieva warned that the concern is not currently just about the size of the debt of artificial intelligence companies, which she described as not alarming at the moment, but rather about the fate of the artificial intelligence sector as a whole and its ability to achieve the expected economic returns.

She pointed out that the concern lies in the possibility of artificial intelligence investments failing to deliver the promised productivity gains, explaining that the expected positive impact of artificial intelligence investments on the economy is, in terms of importance, equivalent to the negative impact of inflation.

Georgieva urged the most indebted countries to develop clear plans to reduce debt levels, noting that what the global economy has witnessed since the COVID-19 pandemic is that governments resorted to borrowing during crises, without taking similar steps to reduce debt during periods of prosperity.

She emphasized that optimal financial resource allocation is a priority for countries in the region, especially in light of rising global debt levels and increasing pressures on public finances.

Georgieva stated that the decisions made by countries regarding their economies remain sovereign decisions, noting that the IMF's advice to Egypt is to continue strengthening the private sector.

She emphasized that enhancing the role of the private sector is an important factor in supporting growth and increasing the economy's ability to withstand shocks.