Gulf Economic Monitor, Issue 4 : Building the Foundations for Economic Sustainability
The economies of the GCC recovered in 2018 despite signs of weakness in the global economic outlook, reinforcing the perception that GCC economies' fortunes are still inextricably tied to oil. Global growth slowed in 2018, as trade tensions be...
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/261591556548229456/Building-the-Foundations-for-Economic-Sustainability-Human-Capital-and-Growth-in-the-GCC http://hdl.handle.net/10986/31653 |
| Summary: | The economies of the GCC recovered in
2018 despite signs of weakness in the global economic
outlook, reinforcing the perception that GCC economies'
fortunes are still inextricably tied to oil. Global growth
slowed in 2018, as trade tensions be-tween the U.S. and
China escalated, and goods trade slowed markedly. However,
the steady increase in oil prices until October 2018 lifted
growth in the GCC economies, from an average of -0.2 percent
in 2017 to 2.0 percent in 2018. Two of the region's
largest economies Saudi Arabia and Kuwait, as well as Oman,
emerged from recession in 2018. Growth outturns were driven
by higher oil production in the second half of 2018, higher
capital investment made possible due to the rise in oil
revenues, and higher domestic demand. Fiscal and external
balances improved, also tracking oil sector performance. GCC
countries' fiscal balances improved in 2018, aided by
the average increase in oil prices and progress with non-oil
revenue mobilization in some countries. This allowed most
countries to reduce fiscal deficits while actually
increasing spending in some cases. Saudi Arabia, for example
was able to halve its overall fiscal deficit in 2018 while
simultaneously increasing total spending by 10.8 percent.
Other countries also demonstrated procyclicality in fiscal
policy, as spending increased across the GCC. Saudi Arabia
and the UAE implemented a 5 percent VAT in early 2018, and
Bahrain followed in early 2019. Oman introduced excise taxes
on tobacco products, energy drinks and soft drinks in
mid-2018 and increased corporate income tax. |
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