Nov. 1 (Bloomberg) -- The central bank governor of Saudi Arabia, the world’s biggest oil producer, joined a top Chinese official in warning against an early withdrawal of economic stimulus measures.

“The world economy is still in a recession with high unemployment rates and scarcity of credit despite the huge fiscal and monetary stimuli,” Muhammad al-Jasser said in a speech at an economic forum in Kuwait today. “The activation of stimulus exit strategies is still too early as it needs good timing and gradualism during the next few months.”

Central banks have started to pare emergency measures taken at the height of the financial crisis. Japan’s central bank said on Oct. 30 that it will stop buying corporate debt at the end of the year. Australia last month became the first Group of 20 nation to raise its benchmark interest rates since the height of the crisis and Norway followed.

Chinese Commerce Minister Chen Deming warned yesterday against an early withdrawal of stimulus measures, citing the risk of another world slump.

“There are increasing signs that the global economy is heading in a positive direction, but there are still many uncertainties,” Chen said in Shanghai. If countries “withdraw the stimulus measures now, the global economy will plunge.”

Spending Program

Saudi Arabia, the Arab world’s largest economy, is drawing on foreign assets to fund a $400 billion spending program over five years to boost oil production capacity and complete large development projects. Saudi Arabia also has cut its reverse repurchase rate three times this year, taking it to the lowest level since Bloomberg data began in September 2007.

The Saudi economy may contract 0.9 percent this year, the first drop since 1999, the International Monetary Fund said on Aug. 18. Kuwait’s economy may shrink between 1.5 percent to 2 percent, Kuwaiti Central Bank Governor Sheikh Salem Abdul Aziz al-Sabah said at the same conference in Kuwait that al-Jasser attended along with other top Gulf banking officials.

“Of course the economy will contract in 2009,” Sheikh Salem told reporters at the forum. The economy is expected to expand in 2010, he said, without giving a forecast.

Al-Jasser said Gulf Arab economies may recover faster than the rest of the world.

Gulf Arab economies will grow 5.2 percent next year as oil prices rise as compared with global growth of 3.1 percent, the IMF said in an October report.

Saudi Arabia’s Tadawul benchmark of stocks has gained some 30 percent this year, while the Morgan Stanley Emerging Markets Index has climbed 61 percent during the same period.

To contact the reporters on this story: Alaa Shahine in Cairo at asalha@bloomberg.net; Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net

Last Updated: November 1, 2009 12:33 EST