Sustainable Economic Recovery Post COVID-19 in the GCC Region
Member states of the Gulf Cooperation Council (GCC) are facing three different but interconnected shocks: the COVID-19 pandemic, a significant drop in oil prices, and climate change. First, COVID-19 has undercut economic growth and stability in the entire world as well as in GCC countries; the International Monetary Fund (IMF) projects a 7.3% economic contraction for oil exporters in the Middle East region, and S&P Global expects GCC government debt to rise to USD 100 billion in 2020. Second, oil prices have fallen from 64US$ per barrel in 2019 to 40US$ in early June 2020, which is alarming since this is well below the fiscal breakeven point for oil. While GCC countries have been trying to diversify their economies, most of them are still heavily dependent on oil exports.
More than 60% of Saudi Arabia, Bahrain, Oman, and Kuwait’s government revenues come from hydrocarbon. This figure drops to 54% for the UAE, and 38% for Qatar. Third, climate change could potentially render the MENA region uninhabitable by 2100 if no action is taken to decrease global carbon emissions. By 2050, temperatures in the MENA region are expected to increase by 4°C, and could reach as high as 50°C during daytime by 2100. Mitribah, Kuwait has already registered temperatures of 54°C in 2016, and Sweihan, Abu Dhabi has reached 50.4°C in 2017. Moreover, by 2050, the climate impact on water resources in MENA is expected to invoke losses up to 14% of GDP.