Muscat: An article by economists of the World Bank has commended the policy responses of the member states of the Gulf Cooperation Council (GCC) to the novel coronavirus (COVID-19), but underlines the potential for additional measures to help cushion the effects of the pandemic and low oil prices on national economies and their local populations.
Titled ‘Coping with COVID-19 and Oil Price Collapse in the Gulf Cooperation Council’, the article underscores the importance of, among other things, tailored policy measures, sops for the private sector, economic assistance to vulnerable households, and continued support for global efforts to contain the pandemic.
Importantly, the ‘blog’, jointly authored by World Bank economists Rabah Arezki, Rachel Yuting Fan, and Ha Nguyen, urges GCC governments to defer any austerity measures to the post recovery phase.
“Countries in the Gulf Cooperation Council (GCC) face a dual shock — from both the COVID-19 pandemic and the collapse in oil prices. Authorities should focus first on responding to the health emergency and the associated risk of economic depression and postpone fiscal consolidation linked to the persistent drop in oil prices until recovery from the pandemic is well underway,” the economists wrote.
Citing projections by international agencies, the experts warn that the GCC region is faced with a “growth downgrade” that, in fiscal terms, is estimated at about $41 billion in 2020 alone. But to the credit of the Gulf states, their well-established and modern public health systems, coupled with their policy responses to the virus, will hold them in good stead through the post-pandemic recovery phase, they noted.
While lauding the “unprecedented policy responses” of the Gulf states, which have helped soften the effect of the dual shock, national authorities should consider “tailoring their responses” according to the severity of the shock, the economists wrote.
“They should focus first on responding to the health emergency and the associated risk of economic depression. Authorities should postpone fiscal consolidation associated with the persistent drop in oil price and its spillovers until the recovery from the pandemic is well underway. Instead, current emphases should be on budget reallocation and more efficient spending. In responding to COVID-19, authorities should boost spending on health — including producing or acquiring test kits, contact tracing technology, mobilizing and paying health workers, adding health infrastructure, and preparing for vaccination campaigns. Scaling up of testing and contact tracing for COVID-19 are especially important to determine the scale of the infection, detect and isolate cases which will be a factor in deciding whether and how to reopen the economy without causing a second wave of infections,” the article stressed.
Furthermore, the economists mooted a “combination of bailouts, eased credit condition and monitoring” to support the private sector, including SMEs. Priority should be given to strategic sectors, notably network industries and services such as transport, logistics, distribution and finance.
The World Bank experts also stressed the need for support to be extended to vulnerable households including expatriate workers. “Cash transfers to vulnerable households would help protect them and support consumption. This is relevant for the large expatriate labor force in the GCC countries. Making expatriate workers eligible for government cash transfers is not only an act of solidarity with the workers but also would enhance the reputation of the GCC as a good place to work,” they stated.
Oman’s policy responses, encompassing public health and safety measures, fiscal stimulus, and macro-financial and monetary initiatives, have received wide praise from a number of international institutions.