GCC countries are forecast to finally achieve the goal of diversifying their economies away from oil over the next three decades, said a report from Fitch Solutions, part of the New York-based group that owns the credit rating agency of the same name.
“We are now turning more optimistic toward the diversification of the bloc, especially given the publication, and apparent commitment thus far, to ambitious diversification plans,” Ms Julie Beckenstein, head of Sub-Saharan Africa and Middle East at Fitch Solutions, told Arab News.
While there were some risks that recovering oil prices could reduce the impetus to reform, demographic change would act to push forward diversification. Large youthful populations entering the workforce would incentivise continued progress toward reform, she said.
Ms Beckenstein added, “We are seeing the ascension to power of a new generation of leaders across the region, with the promotion to Crown Prince of Mohammed bin Salman (32) in Saudi Arabia, Sheikh Tamin bin Hamad Al-Thani (37) coming to power in Qatar (and the rise of) Abu Dhabi Crown Prince Mohammed bin Zayed Al-Nahyan (57).
“These leaders have shown commitment to reform, even if that involves going against other members of the political and religious establishments. Given their young ages, we believe that their reforms will have a long-term impact on the trajectory of the region.”
Over the longer term, she believed that investments carried out in physical infrastructure and human capital would begin to reap dividends, particularly in heavy and primary industries, and healthcare and trade. Investment in quality education would also be crucial.
High youth unemployment
Outside the GCC, social and political stability would be highly contingent on the governments’ ability to address the region’s demographic challenges, the report said. The MENA region has a combined population of 443m and by 2050, the UN forecasts that this figure would reach 654m.
“Weak job creation in the region – an issue which is disproportionately hitting the youths – remains a key cause for concern. Very few, small states, such as Qatar, Kuwait and the UAE are escaping the curse of high youth unemployment, which is otherwise as high as 48.7% in Oman,” said Ms Beckenstein.
Insufficient job creation carried significant risks for social stability across the region. Iraq and Egypt stood out as particular concerns as, “given the sheer size of their populations, large-scale popular unrest would carry significant regional implications”, she said. M