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As Countries Attempt to Rebuild, GCC Economy Set to Grow

As Countries Attempt to Rebuild, GCC Economy Set to Grow

Gulf Cooperation Council nations (GCC) are set to grow this year, following a tough year of economic stress as a result of the Covid-19 pandemic. The GCC nations, which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, are expected to grow at an aggregate 2.2% this year after a 4.8% contraction last year, according to the World Bank in its Gulf Economic Update (GEU).

Despite eased Covid-19 restrictions this year, the World Bank projects that fiscal deficits will persist in the region, particularly for Kuwait, Bahrain, and Oman—the GCC nations with the largest deficits in 2020—but those deficit ratios will narrow, according to the World Bank.

GCC economies are projected to ramp up for several reasons, one being an influx of spending as major events are hosted in the area. The UAE will host the Dubai 2020 World Expo in October of 2021, and Qatar will host the 2022 Fifa World Cup.

A rise in oil prices will also help the economies, allowing the nations to invest in post-Covid recovery. But, the World Bank asserts that the GCC must diversify economic interests apart from oil exports and revenues, which account for 70 percent of the nations’ economies on average.

One way gulf nations are looking to diversify is through foreign investment, namely through India’s National Monetization Pipeline (NMP), the nation’s new push toward infrastructure privatization. This push comes after India’s strict Covid-19 restrictions created a considerable deficit and pushed millions into poverty.

The NMP is part of India’s four-year plan to privatize its infrastructure assets worth $80.4 billion, according to the Emirates News Agency. The Indian government has encouraged 100 percent direct foreign investment in industries such as aviation, power, oil, and gas; and Gulf investors have already taken an interest. India’s Finance Minister Nirmala Sitharaman expects an immense effect on economic growth in what is Asia’s third-biggest economy.

Some of the assets up for grabs include “over 26,000kms of roads, power transmission lines, hydroelectric and solar power assets, phone networks, and nearly 15,000 telecom towers,” as well as “8,000kms of natural gas pipelines, 15 railway stations, railway lines, 25 airports, and a number of sports stadiums,” according to the Gulf Times.

Another way the GEU suggests the GCC nations diversify their economies is through strategic investments in digitalization and telecommunications. As a result of the Covid-19 pandemic, the Gulf, like the rest of the world, has turned toward remote work, online shopping, and virtual learning as viable, stable solutions to the lockdowns. This means that entire economies rely more heavily upon digitalization and telecommunications than ever before.

The GCC nations have recently poured major investments into telecommunication such as mobile broadband. In fact, in GCC nations, “mobile broadband subscriptions per 100 people are now at par with the advanced country average while internet users per 100 people and the percentage of households with a computer exceed the advanced country average,” according to the GEU.

But the GCC nations must increase investment in more advanced technologies, such as 5G, to stay on par with advanced nations which are now keenly focused on tech investment and innovation after the world became heavily reliant on technology post-lockdowns.

If the GCC follows suggestions set out by the World Bank, they are likely to quickly bounce back into economic recovery.

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