GCC economies are no longer defined by oil

One of the most intriguing aspects for those following GCC affairs is the continued commitment of these countries to implement their development programs, undeterred by external noise. Particularly from organisations with extremist ideologies, whether on the left or the right.

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A common charge directed at the GCC’s progress is the supposed manipulation of economic d data. For instance, the decline in GDP of GCC countries is often emphasised negatively at the slightest drop in oil prices, which undeniably affect oil-dependent economies. However, it is important to highlight a crucial point: Gulf economies represent more than just the oil sector, with the non-oil side just as closely interconnected.

It’s important to note that while this correlation was much stronger three decades ago, its significance has diminished substantially due to the diversification that has taken place since.

As a result, the growth rates of the Gulf economies can no longer be evaluated in the same manner as in the past. It is now essential to distinguish between the growth of the oil sector and those of non-oil sectors. The former fluctuates in response to factors beyond the control of oil-producing nations, while the non-oil sectors are more impacted by internal factors, despite still showing some sensitivity to oil prices.

A weaker linkage between oil, non-oil sectors

What we used to witness in the relationship between these two sectors is that a decline in oil sector growth due to falling oil prices was always followed by a similar decline in non-oil sectors.

This is no longer the case. Today, both sectors are growing with only a weak interdependence. For example, the recent drop in oil prices was not mirrored by a decline in GDP of the non-oil sector. On the contrary, this sector experienced growth rates exceeding 4%. This is the sector that should now be relied upon when evaluating economic conditions in the GCC.

Unfortunately, this is not the case, as the GDP growth levels in the GCC are still being linked to the integration of the oil and non-oil sectors. This does not accurately reflect the reality of the ongoing improvement and diversification of economic conditions.

If we assume the non-oil sector achieved a growth rate of 4% while oil prices declined, the overall growth might only be recorded at 2% based on the size of the non-oil sector's contribution. This figure fails to represent the true picture of economic growth.

What truly matters for the future of the GCC countries is the growth of non-oil sectors, which have diversified significantly and now constitute the largest share of Gulf economies. This is attributed to massive investments in these sectors, which have doubled over the past five years.

Failed agenda setting

The Gulf’s developmental experience has become a model for other oil-producing nations, some of which have squandered their resources due to sheer mismanagement or the pursuit of ideological agendas. These policies have cost their populations substantial financial losses and squandered opportunities, yielding no benefits.

Recent developments reveal the depletion of these funds and the failure of such agendas, resulting in painful consequences for the people of these countries, including a decline in living conditions and a sharp reduction in the quality of services and infrastructure.

In stark contrast, the GCC states boast advanced infrastructure and services that are considered among the best in the world, alongside high living standards that remain resilient despite fluctuations in energy prices.

The GCC states are often called upon to provide humanitarian and developmental aid during crises or following wars that cause significant destruction and loss of life. This is evident today, as attention turns to the GCC as potential saviours for reconstruction in Syria, Lebanon, and Gaza.

Humanitarian assistance has already begun flowing from the GCC to these areas, with contributions for reconstruction expected to follow. This reflects the significance of the Gulf’s developmental experience, which has proven to be beneficial both for the region and for other countries in need of support.