The member countries of the Gulf Cooperation Council (GCC) underwent major economic transformations over the past decade. The main goal of the economic policies set into place was to diversify their economies away from the oil sector. This longstanding problem is linked to the non-renewable nature of oil resources. The volatility of oil revenues combined with strong demographic growth have brought the issue back into the headlines.
Measuring and tracking diversification in a rentier economy
Economic diversification in the GCC countries cannot be measured directly. To do so, we would have to have a breakdown of value added per sector, which is not possible with the national accounts of the GCC countries. The diversification issue can also be approached indirectly by measuring the dependence of economic activity, the budget and external accounts on production and revenues generated by the hydrocarbon sector (oil and natural gas).
Dependence of fiscal and export revenues Budget revenues are highly dependent on hydrocarbon revenues in all the GCC countries. The level of dependency has changed slowly since 1990 (see chart 1). Moreover, tax revenues are still small compared to total government income. Corporate and household tax rates remain low due to the rentier economy of the Arab states, because hydrocarbon revenues are the preferred source of budget revenue.
BY Pascal DEVAUX
To Read the Entire Report Please Click on the pdf File Below.
Measuring and tracking diversification in a rentier economy
Economic diversification in the GCC countries cannot be measured directly. To do so, we would have to have a breakdown of value added per sector, which is not possible with the national accounts of the GCC countries. The diversification issue can also be approached indirectly by measuring the dependence of economic activity, the budget and external accounts on production and revenues generated by the hydrocarbon sector (oil and natural gas).
Dependence of fiscal and export revenues Budget revenues are highly dependent on hydrocarbon revenues in all the GCC countries. The level of dependency has changed slowly since 1990 (see chart 1). Moreover, tax revenues are still small compared to total government income. Corporate and household tax rates remain low due to the rentier economy of the Arab states, because hydrocarbon revenues are the preferred source of budget revenue.
BY Pascal DEVAUX
To Read the Entire Report Please Click on the pdf File Below.
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