Oil-exporting nations in the Middle East and North Africa (MENA) region are persistently working towards diversification and adopting long-term strategies to navigate economic challenges and fluctuations, as stated by the World Bank.
Roberta Gatti, the World Bank’s Chief Economist, mentioned that Gulf Cooperation Council (GCC) countries, with varying degrees of diversification progress, are demonstrating a dedicated commitment to diversify their economies.
Economic Transformation in GCC through Diversification Initiatives
The GCC, a six-member economic bloc, which includes major oil exporters such as Saudi Arabia and the UAE, is actively reducing their reliance on hydrocarbon revenues and driving economic transformation through various programs focused on developing non-oil sectors, expanding industry, facilitating investments, and implementing social reforms.
Constraints on crude production by regional oil exporters and global economic uncertainties are projected to significantly slow the broader MENA region’s economic growth this year.
The GCC, which experienced robust GDP growth in 2022, is expected to expand by 1% in 2023. The World Bank’s forecast aligns with the International Monetary Fund’s estimate of 2% regional GDP growth this year.
Roberta Gatti emphasized the importance of adopting fiscal rules and steady oil price budgeting to navigate economic uncertainties effectively, serving as a means to manage economic booms and downturns.
While MENA oil-exporting economies saw substantial growth in 2022 due to rising oil prices, they subsequently faced challenges tied to slowing global demand and OPEC+ production curbs.
Saudi Arabia, for example, employs a quasi-fiscal rule, budgeting with a long-term perspective and considering oil prices, thereby mitigating the impact of economic fluctuations.
Saudi Arabia is making substantial efforts to diversify its economy, including initiatives to increase female labor force participation. This diversification is seen as a strategic move to broaden the country’s economic endowments beyond oil.
In the context of the GCC countries, diversification remains a fundamental goal, and they have the financial capacity to experiment with various policies to ensure the right path for their nominal GDP development, according to The National News.
Overall, the region, both oil-exporting and oil-importing nations, are encouraged to experiment with different policies to promote economic growth and resilience.
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