The strong recovery will also trickle down to next year primarily because OPEC+ mandated oil production and higher oil prices improve business sentiment and attract additional investment. These favourable market conditions have successfully managed to decrease fiscal and external imbalances and have also helped export earnings to recover. However, World Bank has also mentioned that when it comes to the outlook in the medium term, some of the risks like slower global recovery, renewed Covid-19 outbreak and oil sector volatility still remains.

Issam Abousleiman, World Bank Regional Director for the GCC, told the media, “With high population growth and limited options in the private sector, the wage bill has become unsustainable in some GCC countries, as it is a large part of government spending and of the economy overall. Given their improved fiscal situation, this is an opportune time for GCC governments to accelerate their reforms agenda and reach the goals they set for themselves.”

The average GCC wage bill has managed to surpass the Organization for Economic Co-operation and Development’s (OCED) average in the last twenty years, except in Qatar and the UAE, the report mentioned. The civil service allowances in Saudi Arabia rose to SR148 billion in 2019 from SR44 billion in 2016, thereby forming more than a third of the Kingdom’s total wage bill.

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But the bank slightly upgraded its forecast for economic growth in 2022 to between 4.7 percent and 5.5 percent, from a range of 4.6 percent to 5.4 percent previously. This shift would reflect in Bank Indonesia’s (BI) monetary policy stance to “pro-stability” in 2022, from “pro-growth”.

Perry Warjiyo, Governor of Bank Indonesia said that the other policies of the bank will continue to support the country’s economic recovery. The reduction in excess liquidity will be the bank’s first move to unwind its ultra-loose policy and is targeted to help Southeast Asia’s largest economy that is disrupted due to the Covid-19 pandemic.

Warjiyo remarks, which were made during an annual gathering with financial stakeholders matched with his earlier comments on 2022 policy tightening plans, even after the bank cut down on the economic growth forecast of the year.

Warjiyo told the media, “Excess liquidity in the banking system, which is currently very large, will be reduced gradually and cautiously so as not to interfere with the ability of banks in lending and purchasing of state securities to finance the state budget. The policy of low-interest rates… will be maintained until there are early indications of rising inflation.”

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