A number of countries in the region are grappling with financial and economic crises as a result of a 40 per cent decline in oil prices, combined with the severe effects of the COVID-19 pandemic.
The World Bank and International Monetary Fund (IMF) have long been urging these countries to focus on economic reforms designed to help them overcome the crises. Their prescriptions have included calls for accelerated economic diversification.
Everyone admits that the region, given its long-standing dependence on Oil & Gas, will take many years to diversify national economies and embrace industry, tourism, fisheries and the knowledge economy as growth drivers.
Yet, there are external factors that slow the pace of reform required to diversify national economies.
For its part, the IMF believes that the return of the countries of the Middle East to previous levels of economic growth will take about a decade in the face of the continuing pandemic and the toll it takes in the form of daily infections and deaths, not to mention the severe economic cost.
This crisis, characterised by frequent lockdown measures, has impacted private sector businesses, destroyed job opportunities and weighed down efforts to induce an economic recovery. This is reflected in the contraction suffered by many economies.
The IMF expects that the economies of the region will shrink by 4.1 per cent this year with the outlook continuing to remain challenging unless vaccines are provided to help save lives and gradually restore business activity in the region.
Gulf states have not been able to diversify their hydrocarbon-centric economies over the past three despite the repeated urgings of international institutions calling on them to reform their economies, as well as suitably train their national cadres to take up jobs in the private sector.
Indeed, Oil & Gas have almost exclusively bankrolled many economies, meeting the financial burdens of government bodies, while funding infrastructure projects that the private sector has long been dependent on for its survival.
But these countries failed to adopt sound financial and economic policies to prepare themselves for crises of the kind we’re seeing today.
Of course, the pandemic has increased the severity of the problems being faced by many countries around the world.
These shortcomings have been compounded by the absence of economic reforms, poor fiscal management, and a continued reliance on oil and gas revenues, which account for more than 80 per cent of the total revenue of some countries.
What’s required are radical financial and economic reforms to drive the long-term growth plans of these countries