18 November 2021 – Gulf News – www.gulfnews.com
The GCC countries are on their way to overcoming two major obstacles that limited their growth chances over the last two years and delayed many projects that were planned in advance.
The first one lies in the rapid progress made by the GCC countries to surmount the pandemic repercussions. They are now at the forefront in having their economies recover, helped by the restoration of most of their previous operations, notably in tourism and airline services.
Emirates airline has provided a strong indication of such a recovery, as its losses dropped significantly in the first six months of the its financial year 2021-22 by 54 per cent. In addition, holding Expo 2020, the Dubai Air Show and Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC) is further evidence of how fast the recovery process is moving.
The other obstacle from the recent past was the significant drop in oil prices last year, which left a noticeable impact on Gulf economies and exposed their state budgets to additional difficulties. In turn, this led to reducing spending and postponing some development projects.
Cut down on deficits
Preliminary data indicates that the recent improvements in oil prices will be a huge positive on economic activity in the GCC and in reducing deficits. Saudi Arabia for instance announced a significant cut in its deficit for the second quarter to SR4.6 billion, compared to SR109.2 billion in the same quarter of last year.
Kuwait’s deficit also decreased by 94.5 per cent in the first four months of the current fiscal year, and other Gulf states are expected to see similar improvements. This represents an important development that will lead to growth in 2022, of 3-4 per cent.
The GCC countries will also a shrinking in their annual budget deficits, especially by those that carried out financial reforms in recent years and which greatly contributed to diversifying budget resources and creating stable sources of income.
This would certainly allow them to build on these reforms, although some GCC states are still reluctant to take such steps and which lead to great difficulties if oil prices slip by end-2022.
Prepare better for future
Therefore, the latest developments provide an opportunity that may not come again for those countries to avoid more difficulties in the event of future fluctuations in oil prices. As for the others, they still have an opportunity to strengthen their reforms to ensure a strong base for diversified development.
The progress achieved needs to be exploited by taking new measures that support growth, such as adopting Gulf vaccination certificates, similar to what was taken among EU countries.
This will certainly contribute to revitalizing tourism, transport and trade among the GCC states, which still suffer from some dilemmas resulting from the disparity in the way of handling travel procedures over their land borders.
They need to take further steps to reduce travel costs by adopting Gulf vaccination certificates and reducing the costs of PCR tests, which in some countries has turned into a source of wanton profit-taking.
The GCC countries can easily take advantage of financial and healthcare developments to revitalize their economies – it will be an achievement to build on.