In its latest report, the International Monetary Fund (IMF) said the Gulf countries are among the richest in the world. Yet, their estimated financial wealth of $2 trillion may be exhausted within the next 15 years in light of low oil and gas revenues - and unless they accelerate financial reforms.
The IMF cited that these economies were severely affected by the drop in oil prices between 2014 and 2015. This report raised a lot of controversy, uncertainty, and some concerns as to what the economic future of the countries would be.
To begin with, the nature of the conditions and conclusions referred to by IMF should be carefully considered. While there are objective and complicated conditions, there are also some exaggerations that fail to take into account the full picture of the economies, and instead is overtly focussed on one side.
Of course, GCC economies are more affected by fluctuations in oil prices, brought on by sudden changes in economic and security obligations, as well as geopolitical risks. These in turn place additional burden on the economies.
Many ways to take to growth
This is in addition to all the tech-led disruptions, which have contributed to a further imbalance in the redistribution of wealth among industrialized and developing countries. Clearly, regional economies need to do more to diversify despite the progress made over the past three decades.
The IMF report had some exaggerations and removed the oil sector completely from the Gulf’s economic equation in 2035. We do agree that the oil influence will gradually shrink by that date - but it will still remain an important source of energy.
At the same time, the GCC’s financing capabilities to achieve diversification will begin to decline as well. This will result in a major imbalance between current and future spending.
In this respect, it is worth mentioning that the total assets of Gulf sovereign funds amount to approximately $3 trillion.
Don’t be swayed
Therefore, attention must be paid to the difference between objective assessments and exaggerations referred to by the report. Gulf countries should be ready to address potential repercussions, especially as the global economy and energy markets are moving towards renewable and clean energy sources.
Practical measures have already been taken to address this challenge. Britain, for example, recently set 2032 as the cut-off for the manufacture and sale of fuel-powered cars. and is steadily increasing its reliance on renewable energy sources for electricity production, transportation and home use.
Consequently, these developments require taking the IMF warning seriously, and at the same time, take measures to avoid future problems, especially as the time left is short.
However, there is still optimism that the GCC countries - which enjoy financial and human natural resources - can help them avoid this. But that needs redeveloping economic and financial policies and preparing development programmes.
This also requires focusing on the human capital and help them unleash their potential regardless of social positions, and attract those with qualifications from abroad.
With such an economic and development approach, the doomsday image depicted by the International Monetary Fund can be significantly played down and several risks avoided. This will help maintain the high standards the Gulf states are used to.
- Mohammed Al Asoomi is a specialist in UAE and Gulf social and economic affairs.