Factors such as fluctuating oil prices, ongoing replacement of fossil fuels and slow transformation of some economies has induced a general sentiment of GCC economies reporting a slowdown in economic activity. On the contrary, the combination of such a strong portfolio of liquid assets and low debt levels are the key factors in the sustainability of Gulf economies, highlights a new report by Oliver Wyman.
Titled ‘The Arabian Gulf Economies: Asset rich, transforming and full of opportunities’, the report sheds light on factors that will further drive economic transformation and diversification in the region.
It said one of the significant actions taken by the GCC countries is the introduction of regional transformational programmes to wean away from fossil fuel dependency. ‘The modification of revenue channels and high value liquid assets are shaping into the main collaterals required to finance the formidable economic transformation and diversification initiatives led by the GCC regimes. Measures such as the value added tax (VAT) initiatives in the UAE, Saudi Arabia and now Bahrain have supported the diversification of these economies,’ the report said.
Pedro Oliver, regional head (MEA) region at Oliver Wyman, said, “Undoubtedly, the oil and gas reserves of the Gulf countries have enabled one of the biggest economic booms in human history, but this has also materialised because these countries had, and still have, the willingness to advance and improve themselves. Looking towards the future, GCC economies must take the advantage of the valuable lead time that they have to transform into post-oil economies, because fossil fuel substitution will not happen as fast as many people believe it will.”
The report further highlighted the key areas of growth opportunities in the region over the next five years, such as overall restructuring of the public sector and diversification into renewables and petrochemicals.