GCC Countries : From Oil Dependence to Diversification

Ugo Fasano-Filho, and Zubair Iqbal

• Publisher: INTERNATIONAL MONETARY FUND
• eBook ISBN:
  9781589062337
• Year: 2003

NONE

GCC Countries: From Oil Dependence to Diversification

Over the past three decades the member countries of the Cooperation Council of the Arab States of the Gulf (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have witnessed an unprecedented economic and social transformation. Oil proceeds have been used to modernize infrastructure, create employment, and improve social indicators, while the countries have been able to accumulate official reserves, maintain relatively low external debt, and remain important donors to poor countries. Life expectancy in the GCC area increased by almost 10 years to 74 years during 1980-2000, and literacy rates increased by 20 percentage points to about 80 percent over the same period. Average per capita income in the GCC countries was estimated at about $12,000 in 2002, with their combined nominal GDP reaching close to $340 billion (more than half the GDP of all Middle Eastern countries; see Table 1). With very low inflation, overall real economic growth has averaged 4 percent a year during the past three decades, while the importance of non-oil economic activities has grown steadily, reflecting GCC countries’ efforts at economic diversification. Moreover, central bank international reserves alone in some GCC countries are equivalent to about 10 months of imports. This progress has been achieved with an open exchange and trade system and liberal capital flows, as well as open borders for foreign labor. The GCC area has become an important center for regional economic growth.

Table 1. GCC Countries: Selected Economic Indicators, 2002

Sources: National authorities; and IMF staff estimates.

¹ Including expatriates.

² Including investment income of government foreign assets.

³ Based on current production.

⁴ These figures are not an accurate reflection of the country’s foreign assets position because data on government foreign assets are partial in some GCC countries.

⁵ Weighted average.

Figure 1. GCC Countries: Oil Dependency ¹

(Average in 1998-2002; percent)

Sources: National authorities; and IMF staff estimates.

¹ Total government revenue includes investment income, and total exports include reexports.

With monetary policy directed at maintaining a stable exchange rate and controlling inflation, fiscal policy has been the primary instrument to achieve other economic objectives, including growth, employment, and equity. But fiscal policy has been constrained by the heavy dependence of government revenues on volatile oil export receipts (see Figure 1). In addition, in many of these countries, a la...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• GCC Countries: From Oil Dependence to Diversification
• Bibliography