The Gulf Economic Barometer monitors initiatives taken by Gulf states as they seek fiscal, monetary, and labor policy changes to meet the challenge of reduced state revenue from natural resources. The key trend is a major shift in the way the GCC countries have been spending on public sector wages, infrastructure, and social services over the last decade. The GEB documents the policy changes as they are announced and/or implemented by country and by sector and will be updated regularly as data becomes available. The information here is neither official nor exhaustive.
While there are professed visions of change away from state-led growth, in which new private sector dynamism and the expansion of Gulf equity markets would employ citizens and wean states from oil and gas revenue, the realities of politics on the ground in the last two weeks demonstrate there are more powerful forces at play.
The Saudi, Bahraini, and Emirati efforts to isolate Qatar diplomatically and logistically from its Gulf Cooperation Council partners highlights structural weaknesses in many of the Gulf states, not just Qatar.
Trump may have elicited a deal that serves the interests of Saudi Arabia and the fund managers receiving the investment, but not necessarily filling a funding gap in an already deep pool of U.S.-based investor interest.
Despite slowdowns in consumer demand and general economic activity, there is evidence of alternative economic behavior and microenterprise that is thriving in the Gulf.
As a burgeoning global trend, economic nationalism is also surging in the Gulf states. What may be lost is the decade of efforts in economic integration and negotiations to make the GCC work as a common market, with complementary assets.
The beginning of the Trump administration points to, at the least, a heightened period of political and economic risk, which Gulf governments, financial institutions, and businesses will have to price, assess, and manage.
Trump’s pro-growth agenda will need partners, and the GCC states are also looking for investment partners in their diversification efforts and for placements for state-owned investment vehicles. It will be the politicization of these partnerships that will create the most risk.
The Saudi budget for 2017 demonstrates that fiscal reform works; at least, it shows that with a reduction in spending will come a decline in deficit.
In the GCC, there is an effort to recalibrate the relationship between foreign workers and Gulf national economies, in both the reliance on foreign labor and the downward pressure it has on service sector salaries.
Abu Dhabi-owned airline, Etihad Airways, announces job cuts in an austerity measure.
The new Trump administration will likely offer a more transactional view of U.S. foreign policy toward the Middle East, and specifically toward the Gulf states.
Saudi Arabia’s unprecedented bond sale worth $17.5 billion had impeccable timing, given Donald Trump’s victory in the U.S. presidential election.
Low yields result in more accessible capital for GCC states, however repayment could be a challenge in the long term.
Saudi Arabia releases its long awaited National Transformation Plan.
The GCC states have drastically reduced fuel subsidies, however have yet benefit from deficit relief.
The Egyptian economy is put under further pressure as aid becomes less of a priority for GCC states.
The real victims of the oil slump could be in the domestic economies, from local banks to small and medium size enterprises, to those businesses most closely connected to the energy sector, and those contractors servicing infrastructure growth.
The commercial banking sector in the GCC comes under pressure as oil prices continue to decline.
Breaking diplomatic ties with Iran might result in Saudi Arabia missing out on a regional economic success story.
As budget deficits become the new norm for oil-exporting Arab Gulf states, there is no evidence that they are cutting down on defense spending.
For the United Arab Emirates, the political incentives for a renewable energy commitment are as compelling as the economic case.
As energy prices stay low and demand decreases, Qatar, like many GCC states is under increased pressure to strengthen political ties and avenues of economic cooperation with Asia.