The Gulf countries have to make some tough economic choices in 2016, with the focus likely to be on ensuring steady reforms to circumvent the impact from the extraordinarily low oil prices. The prices have been declining for 18 consecutive months and, seemingly, with no end in sight.

Changes to oil prices — in either direction — have their impact on economic choices.

The petroleum sector is essential for the well-being of GCC economies, being the primary source for treasury and export revenues. In fact, oil revenues provide the necessary financing for public expenditures.

Of all the Gulf countries, Kuwait is the most dependent on the oil sector, which contributes about 90 per cent of treasury and export sources. However, its significance is bound to slide reflecting the low oil prices.

Undoubtedly, the goal of economic diversification is exceptionally vital nowadays, requiring concerted efforts on the state’s part. Nevertheless, this cannot just be realised through mere urgency.

Diversifying away from oil requires sustainable efforts and meeting the competitive advantages of the Gulf economies. Dubai for one represents a successful example in this respect by developing — and maintaining -competitive advantages in aviation, hosting events and tourism, to name a few such areas.

High-profile events such as Expo 2020 in Dubai and the World Cup 2022 in Qatar help in diversification efforts.

Decision-makers do have the option of ensuring reforms succeed by cutting out the bloat from state budgets where possible and even revisiting subsidies.

In 2015, the UAE assumed the regional lead in revising prices for petroleum products at the retail level. Notably, motorists enjoyed lower — rather than higher prices — due to decline in oil prices.

For its part, Bahrain has moved to end subsidies offered for meat. Sill, officials have to decide on those existing for utilities and petroleum products during 2016.

Overcoming joblessness or creating sufficient job opportunities is another challenge for some GCC economies. Oman, Bahrain and Saudi Arabia suffer from unemployment rates of 8.1 per cent, 7.4 per cent and 5.6 per cent, respectively. The ‘Rethinking Arab Employment’ report, published by the World Economic Forum, gives higher figures for joblessness among youths.

Of the three countries, Saudi Arabia has adopted a controversial measure of banning expatriates from working in more than 30 job categories. Notwithstanding the objective of sustaining employment opportunities for locals, the move is not popular with private sector investors.

Within the broader pan-GCC, authorities are expected to address the challenge of ensuring implementation of projects dealing with regional economic integration schemes. The 36th summit GCC held in Riyadh in December stressed the need for completing projects such as the customs union and Gulf common market (GCM).

The customs union focuses on adopting unified trade rules with non-GCC members, while the GCM allows for free movement of factors of production among member-states.

Clearly, the New Year brings with it serious economic challenges and opportunities. Absence of reforms could cause serious budgetary shortfalls for several GCC member states.

A failure to embrace meaningful economic reforms could undermine credit ratings for some GCC countries more so than others. Standard & Poor’s now has a negative outlook for more than one Gulf economy.

The writer is a Member of Parliament in Bahrain.