Publication: Gulf Economic Update, December 2019: Economic Diversification for a Sustainable and Resilient GCC
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2019-12-01
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2019-12-09
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This edition of the Gulf Economic Update explores the links between economic diversification and environmental sustainability. The analysis highlights the need to integrate environmental sustainability and ecosystem resilience considerations into the decision-making process on the diversification paths and options in the GCC countries.
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“World Bank. 2019. Gulf Economic Update, December 2019: Economic Diversification for a Sustainable and Resilient GCC. © World Bank. http://hdl.handle.net/10986/32811 License: CC BY 3.0 IGO.”
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Publication Gulf Economic Update, August 2021(World Bank, Washington, DC, 2021-08-04)The COVID-19 pandemic and the decline in global oil demand and prices dealt the GCC countries a health crisis and a commodity market shock. The GCC’s aggregate GDP contracted by 4.8 percent in 2020 from 2019, with the growth outturns ranging from -3.7 in Qatar to an estimated -6.3 percent in Oman. The authorities responded to the pandemic with stringent health measures which helped contain the spread of the disease and saved lives but hurt economic activity. Following a year of economic distress, the GCC economies are expected to return to growth in 2021, buoyed by the global economic recovery, projected at 5.6 percent (upgraded by 1.5 percentage points from the projection in January 2021), the revival of global oil demand, expected at 96.5 billion barrels per day (from 91 billion barrels per day in 2020), and the rebound in international oil prices to an annual forecast average US$56 per barrel (now outpaced by an actual average US$61.45 in January-May 2021). The forecast is for an aggregate GCC GDP growth of 2.2 percent in 2021, roughly tracking the turnaround in high-income countries, with the outcomes ranging from 1.2 percent for the UAE to 2.4 percent for Saudi Arabia and Kuwait. Thereafter, economic growth in the GCC is expected to firm up to an annual average 3.3 percent for 2022-23. With rising oil prices in the first half of 2021, a potential upside scenario for the second half of the year sees improved current account balances being channeled directly to public sector savings. Because of the exposure to global oil demand and personal service industries and the continuing effects of the pandemic, downside risks to the outlook are also high. In this issue of the Gulf Economic Update, the focus is on fiscal revenues and structural reforms including strategic investments in digitalization and telecommunications. Strategic investment in advanced telecommunications technologies, including 5G, is underway in the GCC. But beyond capital spending on infrastructure, the telecommunications sector would benefit greatly from improvements in the legal, regulatory, and competition frameworks under which service providers operate.Publication Gulf Economic Update, Fall 2021(World Bank, Washington, DC, 2021-10)The economic outlook for the Gulf Cooperation Council (GCC) economies appears far rosier now than it did even six months ago. Increased investment and consumption both public and private are contributing to growth while inflation remains subdued in most economies except for Saudi Arabia where it is currently at 5.5 percent and expected to fall sharply as the impact of last year’s Value-Added Tax (VAT) hike falls away. Despite this rosy picture, the authorities should continue to follow the path of prudent macroeconomic management consolidating their fiscal balances, moving ahead with the introduction of VAT in Qatar and Kuwait and focusing on reducing the role of the state in economic management. UAE’s government related entities especially those in the construction sector deserve a careful review to ensure that their borrowing remains sustainable and to adjust to the new conditions.Publication Gulf Economic Update SPRING 2022(Washington, DC, 2022)The Gulf Cooperation Council (GCC) countries were characterized by a robust economic rebound from the pandemic in 2021 and the beginning of 2022 as well as a partial restoration of external and fiscal positions following deep plunges in 2020. The war in Ukraine is projected to provide a windfall for the GCC; it has also placed energy security at the forefront of major importers’ agenda, which could accelerate the global green growth transition. The faster and bolder efforts to decarbonize the global economy, which the war in Ukraine is likely to speed up, implies that it is critical to invest the windfall in the GCC’s economic and environment transition. GCC countries are facing limits to the oil economy on which they have flourished for the last seventy years. GCC countries face twin challenges of (i) how to move to a more sustainable growth model that is less dependent on oil and downstream petroleum sectors and that can provide valuable jobs for their inhabitants while (ii) managing the transition to a global low-carbon economic environment that could see oil revenues greatly reduced within the next few decades. The current situation has sometimes been portrayed as a threat to the GCC or at the very least as a trade-off between faster growth and climate sustainability. However, this special focus section reframes the discussion by focusing on the opportunities for the region to restructure energy subsidies. to become renewable-energy powerhouses, and the importance of getting prices right for an enabling environment that can place the private sector at the forefront of the new growth model. The section also highlights the fiscal space that can be created by re-thinking energy subsidies and provides a political economy sensitive approach to addressing the concerns of households and industry. Linking the expected savings to investments in renewables and incentives for increased entrepreneurship and innovative sectors could represent a solution to one of the GCC’s greatest challenges, producing high income jobs for its youth.Publication Gulf Economic Monitor, February 2018(World Bank, Washington, DC, 2018-02)This second edition of the twice-yearly Gulf Economic Monitor describes recent economic developments, near-term prospects, and broader reform priorities in the Gulf Cooperation Council (GCC) countries (The Pulse of the Region). Regional aggregate GDP growth in 2017 weakened to just 0.5 percent, weighed down by oil production cuts and tighter fiscal policy that took a toll on non-oil growth. Prospects, however, are for a gradual strengthening, helped by the partial recovery in energy prices, the expiration of oil production cuts after 2018, and an easing of fiscal austerity. Aggregate growth in the region is expected to strengthen to 2.1 and 2.7 percent in 2018 and 2019, respectively. Risks to the outlook include potential external headwinds resulting from the tightening of monetary policy in advanced economies and/or geopolitical tensions that lead to volatility in global financial markets or commodity prices. Although fiscal and external balances are improving, the region continues to face large financing needs among both sovereigns and corporates, and thus remains vulnerable to volatility in global capital flows and the cost of funding. Finally, the reform agendas under consideration in GCC countries are necessarily complex and require considerable political resolve. The Monitor also describes how, following three years of sustained fiscal adjustments to lower oil prices, the GCC countries, led by the Kingdom of Saudi Arabia, are shifting attention towards deeper structural reforms. These are needed to breathe new life into sluggish domestic economies, create jobs for young people and strengthen private investment, to broaden the economic base and to anchor longer term fiscal sustainability. The report, however, cautions against policy complacency stemming from the recent partial recovery in oil prices that leads to loss in reform momentum. Instead, it urges countries to double down on reforms in order to secure the long term futures of their economies and their people. The final part of the report includes an analytical In Focus section that discusses the sustainability, equity, and welfare challenges confronting regional pension systems.Publication Gulf Economic Monitor, November 2018(Washington, DC: World Bank, 2018-11-01)The near-tripling of oil prices from their trough in January 2016, to nearly 80 US dollars per barrel in early October 2018, has spurred a recovery in the GCC economies, following three years of persistent weakness. Additional support has come from rising oil production, and a slower pace of fiscal consolidation as government revenues have increased. Saudi Arabia emerged from recession in the first quarter of 2018 and Ku-wait, in the second quarter. The United Arab Emirates, Qatar, Oman and Bahrain posted positive economic growth rates in the first half of the year. Higher energy prices and rising oil production are also helping the GCC countries to narrow large fiscal and external deficits, which had emerged in the wake of the 2014 oil shock. On aggregate, the region is expected to post growth of 2.0 percent in 2018, following a contraction of 0.3 percent in 2017 (the first such contraction in over a decade). Looking further ahead, growth is expected to reach 2.7 percent in 2020, as high energy prices and the expiration of the OPEC agreement bolster government revenues, support higher government spending and lift domestic sentiment and activity. External and fiscal imbalances are also expected to narrow, with Saudi Arabia and the UAE achieving near fiscal balance by 2020 and, along with Qatar and Kuwait, returning to cur-rent account surpluses during 2018-20. This positive outlook is underpinned by an upward revision of our oil price forecasts from 60 US dollars a barrel for 2019-20 (in the February 2018 issue of the Gulf Economic Monitor) to 72 US dollars a barrel for that time period. Projections also assume that GCC countries will persevere with important structural reforms initiated in recent years.
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