GCC is a group of economically strong oil led countries. We begin by analyzing one of the most important measures of any economy; its output. The most reliable variables to measure that are GDP growth – ‘the rate of increase in the value of goods and services a country produces in one year ‘and GDP per capita – ‘GDP/ total population’. We look at both one by one.
a. GDP per Capita
The GDP per capita bar graph plots the GDP per capita of the GCC economies against the highest rated economy of Norway with a GDP per capita of almost $90,000 in 2015. Qatar, the richest of the GCC nations is close behind with a high per capita income while Oman lags behind the most.
Also, it can be observed how per capita income has changed over the years between 2011 and 2015. While it increases Y o Y for Saudi Arabia, UAE and Bahrain, it has fallen for Kuwait and Oman. The GDP per capita for Qatar has remained more or less same over the years.
b. Real GDP growth rate
Real GDP growth rate is the most reliable statistic used to measure a country’s growth. It is the economic growth from one period to another expressed as a percentage adjusted for inflation i.e. the real rate of change in a country’s gross domestic product (GDP) from one year to another.
The growth rate graph plots the real GDP growth rates for GCC countries benchmarked against the fastest growing economy during the period, China. It can be observed that GCC economies, Saudi Arabia, Kuwait and Qatar grew in double digits and faster than China in 2011 but slowed down thereafter with little recovery in 20152.
Oil contributes to a major share of GDP of GCC economies and hence much of this slowdown can be explained by lower oil output, lower oil and gas prices and weak domestic and global demand during the period. Other country specific reasons are as follows:
Saudi Arabia
- Public spending has provided considerable support to its economy. With lower oil prices during this period, the fiscal receipts fell as a result of which public spending had to be curtailed. This led to lower consumption and investment thereby slowing down the economy.
- There are fewer jobs for the skilled workforce which restricts its development into a knowledge economy. There is high demand for unskilled labor which is met mostly through immigrants. Though the government has introduced the Nitaqat program for Saudization but more needs to be done to generate new jobs for the educated workforce too.
With strong reserves in place and diversification in action, GCC states continue to remain strong but are expected to slow down a little in 2016. According to the latest MENA Economic Monitor Report – Spring 2016, overall growth in GCC countries is expected to fall to 2.2% in 2016 from 3.1% in 2015.