Introduction
Tough days are still on for all six countries of Gulf Cooperation Council (GCC). Various reports and survey including report of World Bank provides for slashing growth rate and tightening of monetary and fiscal policies and increased fiscal deficits. World Bank agrees that the prime reason for this forecast is majorly due to expectation that oil prices will continue to trade on lower levels in comparison to previous years’ prices. Oil prices may marginally increase from current prices but large gap still exists.
What is the Concern?
Although the growth rate for all the countries in the region is predicted to be on a declining mode, United Arab Emirates (UAE) and Qatar are still in better position than other counties in the region. Kingdom of Saudi Arabia (KSA) is expected to be having the worst growth rate decline among all the countries.
The economic outlook for all oil producing counties is deteriorated ever since the start of collapse in prices of oil, gas and energy. Economies that have already diversified their economy are in better position like UAE is expected to outperform its counterparts because a large portion of its GDP now comes from infrastructure and tourism.
Qatar though largely dependent upon oil and gas output but is still going strong because strong financial reserves and large reserves of natural gas.
Other nations, namely, Oman, Bahrain, Kuwait and KSA are hit strongly after an era of rapid growth. A report issued by BMI goes on say that growth rate of KSA is expected to be only 1% for year 2017 and GCC posting a budget deficit of 11% in 2016 with KSA being the worst offender. Oman and Bahrain will also be the bigger contributors to this deficit, report says.
Though there is no sortilege for any of GCC economies going into recession in coming year but a sharp slowdown is forseen. Increased cost of fuel and energy, reduced purchasing power of consumers and continuously falling oil prices have substantially shaken the investor’s confidence resulting in lower investments and increased financial costs due to tightening of liquidity norms.
Bottom Line
GCC nations have already identified the need of hour and started diversifying their economies from oil and gas products on one side and formulating and amending the existing Corporate and Financial Laws to bring them in line with international laws on the other side. KSA already implemented new Company Law, Employment Law, trademark law and arbitration law and will soon be implementing International Financial Reporting Standards for recording of financial statements to increase confidence of international investors. Many other nations are also following the same model to give a boost to their economy and keep the track of rapid growth going on.
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