Regional wealth funds, free-trade zones and the Saudi Stock Exchange are expected to boost GCC economic growth and spur development—even if oil doesn’t cooperate.
Low oil prices are unlikely to impede the strategic objectives or development spending in member states of the Gulf Cooperation Council. If anything, the GCC countries—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman—are redoubling efforts to diversify the business mix in the Arab Gulf, which remains a safe haven despite security issues elsewhere in the Middle East.
The opening of the Saudi Stock Exchange to foreign investors will help deepen the equity market and encourage further development of the financial services industry. More importantly, a greater number of companies will be able to raise capital to create private-sector jobs for Saudi nationals.
Four of the top 10 sovereign wealth funds worldwide are based in the GCC. Over the next few years, they are expected to invest significantly in local development projects that support economic growth and employment. Trade among GCC countries is likely to increase with the launch of a customs technology initiative aimed at speeding up the flow of cargo.
The United Arab Emirates pioneered the growth of GCC free-trade zones, which are helping to attract foreign direct investment. The UAE might also benefit from any easing of sanctions on Iran, given its commercial links with that country. Meanwhile, Dubai is stepping up investment spending as it prepares to host the 2020 World Expo. The UAE is planning the Arab world’s first unmanned Mars mission in 2021.
Qatar is expected to remain the fastest-growing economy in the GCC this year, with low oil prices unlikely to derail the government’s $210 billion, five-year infrastructure investment program. The country is moving forward with plans to host the 2022 World Cup (despite a massive corruption scandal that has engulfed FIFA). Meanwhile, Qatar remains the world’s biggest exporter of liquefied natural gas and will add to its capacity this year, when its $10 billion Barzan gas-production facility begins operating.
Oil-rich Kuwait, with an estimated 89 years of petroleum reserves, could lag behind its GCC neighbors in terms of real GDP growth this year. However, Kuwait is also stepping up efforts to diversify its economy. Nurturing the private sector will be critical in terms of creating productive, rewarding jobs throughout the region for the fast-growing populations of the GCC nations.