RIYADH: High energy prices have strengthened the economies of Gulf Cooperation Council countries, making them less vulnerable compared to other regions, according to the governor of the Qatar Central Bank. 

Speaking at a panel discussion titled “Resilience of the Financial System in Emerging Markets” on the first day of the AlUla Conference for Emerging Market Economies, Bandar bin Mohammed bin Saoud Al-Thani attributed this resilience to sovereign wealth funds, disciplined fiscal policies, and ongoing economic diversification efforts.  

The remarks align with projections that the region’s gross domestic product growth will nearly double to 3.6 percent in 2025, compared to a global forecast of 2.8 percent, according to Oxford Economics. Credit ratings agency S&P Global also expects GCC banks to maintain strong asset quality, profitability, and liquidity through 2025.  

“In our region, which is the Middle East and North Africa, I look at it in two parts. The first part is GCC countries. GCC countries are less vulnerable, and they’re more resilient because of several factors,” Al-Thani said. 

He noted that strong oil and gas revenues have allowed Gulf nations to build financial buffers over the past few decades, supporting their economies in times of uncertainty. “The third is the fiscal disciplines. Most of the GCC countries have a disciplined fiscal policy. Fourth, in my point of view, is that most of the GCC countries came up with a plan of diversifying their economies and they started to execute this plan,” he said. 

Al-Thani also provided a global comparison, noting that while the US economy remains strong, with robust job markets and contained — but still elevated — inflation, other regions face different challenges. 

The panel also explored financial sector trends in the Arab region, with Fahad Al-Turki, director general chairman at the Arab Monetary Fund, highlighting the dominance of banks. 

“The financial sector within the Arab region is dominated by the banking sector — around 93 percent of the financial sector is banking, which represents around 145 percent of the GDP from the region; this compares to 220 percent in advanced economies,” Al-Turki said. 

He noted that in the GCC, the banking sector’s contribution reaches about 240 percent of GDP. “There are three countries that account for almost two-thirds of the banking sector in the whole Arab region, and these countries are Saudi Arabia, the UAE, and Qatar,” he said. 

The governor of the Central Bank of Azerbaijan, Taleh Kazimov, addressed the broader economic implications of geopolitical tensions, citing inflation, changes in international settlements, and regulatory shifts as key concerns.   

Meanwhile, Andriy Pyshnyi, governor of the National Bank of Ukraine, underscored the distinct challenges facing his country’s financial system. 

“Their activity and operations of the National Bank of Ukraine are defined by the war. The country that has been resisting a full-scale invasion for three years and therefore all processes that in one way or another define the logic of our actions, our policies, decisions, position are determined with the aim to ensure macro financial stability in the conditions of the full-scale war,” Pyshnyi said.  

The AlUla Conference for Emerging Market Economies, organized by the International Monetary Fund and Saudi Arabia, aims to tackle global economic challenges. The two-day event brings together finance ministers, central bank governors, policymakers, and leaders from the public and private sectors, alongside international institutions and academic experts. 

RIYADH: Emerging market economies are facing escalating challenges, including geopolitical tensions, sluggish global growth, financial volatility, and increasing public debt, according to the governor of the People’s Bank of China. 

Speaking at the two-day AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the International Monetary Fund, Pan Gongsheng emphasized the need for proactive policy measures and strengthened multilateral cooperation to enhance economic resilience. 

“In my view, emerging markets face four key challenges,” Gongsheng said. “The first challenge is geopolitical tension.” He highlighted how increasing geopolitical conflicts and protectionism disrupt international value chains and restrict the flow of capital, technology, and labor. 

“There has been a drop in global growth and productivity gains and the rising divergences in key industries across countries, mainly due to uneven development and resource misallocation,” he said. 

Gongsheng’s remarks align with the IMF’s recent report, which warns that friendshoring — the practice of countries trading primarily with geopolitical allies — could reduce global economic output by up to 1.8 percent. 

Emerging markets, particularly in Asia, may experience up to 6 percent declines due to this shift.

Despite these warnings, a Financial Times report said China has intensified its control over technology and resources, including restricting key battery technology exports, disrupting global value chains, and escalating geopolitical tensions.

Gongsheng identified the second challenge as the slower medium-term growth of the international economy. 

“We are now facing policy uncertainties in some economies. If protectionism escalates, rising trade fluctuations will drive up inflation expectations and undermine medium-term growth,” he added. 

Citing IMF forecasts, he said global economic growth is projected to hover at just 3 percent in the medium term, the lowest level since 2000. 

Financial market volatility and capital outflows represent the third major challenge. 

“The trajectory of the interest rate in major advanced economies remains highly uncertain,” Gongsheng said. 

“Markets have become particularly sensitive to unexpected economic data. If rates differ and rise significantly from market expectations, market repricing may increase asset price volatility in emerging markets.” 

This aligns with a recent Reuters report, which said emerging markets are facing significant challenges due to a strong US dollar and high treasury yields. 

These factors have led to weaker local currencies, increased costs for servicing dollar-denominated debt, reduced capital inflows, and dampened economic growth. 

Policymakers in these regions find it difficult to counteract these pressures effectively, which are further heightened by new US tariff and trade policies. 

The fourth issue Gongsheng discussed was the burden of high public debt and its implications for financial stability. 

“The IMF points out that global public debt risk has risen significantly due to political and other factors. Those risks not only exist in developing countries — the level of public debt in some advanced economies also merits close attention,” he said. 

He warned that growing investor concerns over fiscal sustainability could trigger government bond market volatility, with potential spillover effects on other asset classes, liquidity risks, and financial stability. 

According to a report by the Institute of International Finance, the global debt stock increased by over $12 trillion in the first three quarters of last year, reaching nearly $323 trillion. 

The IIF attributes the rise to declining borrowing costs and a heightened risk appetite among investors, underscoring concerns similar to those expressed by the governor. 

To address these challenges, Gongsheng outlined key policy responses for emerging markets. 

“First, we should continue improving monetary policy frameworks, enhancing the efficiency of monetary policy transmission, increasing policy transparency, and improving policy communication,” he said. 

He also advocated for increased exchange rate flexibility, stronger public debt management, improved macroprudential regulations, and the development of local currency markets to mitigate capital flow risks. 

Gongsheng stressed the importance of multilateralism and global financial governance reform. 

“The IMF has made great progress in surveillance and governance reform. At the same time, there is still more work to be done for us to advance global financial governance reform,” he said. 

He called on the IMF to enhance support for developing countries, promote trade and investment liberalization, and establish comprehensive policy tools to help emerging markets address capital flow risks and external shocks. 

“The current quota shares can no longer reflect the actual position of emerging markets in the global economy,” Gongsheng said, urging the IMF to establish a “concrete and binding timetable” for future quota realignments, with discussions on fiscal realignment plans set by June.