GCC Economies Struggle with Post-COVID Options, with instability on the Horizon
The future of so-called rentier states, countries with their economies based on extractive resources such as oil, gas and minerals, is under severe pressure. The impact of the Covid-19 black swan event, the resulting oil and gas demand destruction and a possible moving forward of peak oil demand scenarios are causes for concern in the overwhelming majority of Gulf Cooperation Council (GCC) member states. In addition to this group, which includes OPEC producers such as Saudi Arabia, UAE and Kuwait, other countries in the MENA region are feeling the brunt too. From Morocco in the west to Iran in the east, the region is waking up slowly to a new reality threatening its normal way of working. Lower revenue, increased government budget deficits and higher unemployment are not only resulting in a larger call on hydrocarbon-based revenue providers but are also affecting the countries’ own financial institutions, such as sovereign wealth funds (SWFS) and local banking systems. The total pressure on governments, economies and societies is expected to forge new realities but it also potentially threatens the historical basis of regime-societal frameworks. More instability could ensue very soon.