Oil-rich
GCC has been diversifying for some time - with the development of economic
cities, housing complexes, maritime ports and through encouraging the small and
medium enterprises. They have been attempting to break the resource
curse. Not so successful. The impact of current low oil prices on
Gulf Co-operation Council economies will be a severe economic slowdown as the
transmission mechanism through public spending can now operate only if they dip
into their reserves.
The
break-even prices for oil have been estimated to be much higher than given
prices. and with sunk costs in the hydro carbon sector, GCC states
would have to struggle to balance their revenues and expenditures.
Liquidity will decline as oil revenues fall and with pegs to the dollar,
(except Kuwait) authorities are left with few monetary
policy tools. Given the low skills of the nationals and the unduly high
dependence on expatriates, factor productivity is bound to decline. Distorted
economic incentives do not encourage investment. There is an
aversion to risk-taking with nationals relatively comfortable with a state employment culture and undue
dependence on expatriates in the private sector.
The
number of unemployed nationals in the Gulf Cooperation Council (GCC) is
projected to exceed 1 million over the next five years. This is a serious
social issue already felt since post 2011.
Gold
will also be impacted as there appears to be a correlation (positive ) between
oil and gold.
Views
expressed without any risk or responsibility.
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