Speech

Promoting Resilience: Shaping the Future of the GCC Economy Amid Regional and Global Challenges

February 11, 2025

Assalamu alaikum!

Minister Al Hussaini, many thanks for your kind introduction. And thanks to you and Dr. Al-Budaiwi for inviting me to address today’s panel on the future of the Gulf Cooperation Council.

The GCC has been a bright spot in the world economy. Member countries have enjoyed sustained growth, contained inflation, and built strong buffers.

This success did not happen in a vacuum. GCC countries have been doubling down on difficult but necessary reforms. Diversifying government revenues. Improving the business climate. Increasing access to finance. Making labor markets more flexible and raising women’s participation.

These reforms have accelerated economic transformation and diversification. They have unlocked growth in new sectors such as tourism, logistics, finance, and renewable energy.

So, please keep the momentum going! More progress on these reforms will help GCC economies continue to become more diversified and more resilient.

It’s easier said than done. Especially in a world of rapid technological change and transformations.

In this context, let me highlight three priorities for GCC countries to continue to lift growth potential:

First, raise productivity.

Our analysis suggests that policies to safeguard macroeconomic stability and facilitate digitalization had the largest contributions to the GCC’s total factor productivity growth over the past two decades.

Let’s start with the basic precondition, macroeconomic stability. Medium-term fiscal consolidation, with a focus on non-hydrocarbon revenue mobilization, would help ensure macroeconomic stability while increasing resources available for growth-enhancing investments.

So far, many GCC countries have made remarkable progress. Saudi Arabia was one of the first to introduce a VAT and has doubled its non-oil revenue in four years.

But for many countries, there is more work to do in this area.

Fiscal consolidation should also be supported by better and more efficient public spending. Credible, medium-term fiscal frameworks will be essential.

Then let's turn to digitalization and AI, which could also boost productivity growth.

With AI initiatives and high digitalization levels, GCC countries have built strong foundations to harness these promising technologies. Greater productivity and benefits to consumers that come with further AI adoption could, for instance, boost the UAE’s GDP by around 35 percent by 2030.

To maximize the productivity-enhancing benefits of these transformational technologies, it will be critical to provide training and education.

That brings me to the second priority: enhance the environment for innovation, creativity, and entrepreneurship.

Human capital is a catalyst for economic progress and prosperity.

Investing in education and skill building is essential to compete in a rapidly changing world economy.

So is bringing more young people and women into the workforce.

Another catalyst for economic progress is R&D, which fosters technological innovation by creating new knowledge.

Across GCC countries, there are promising initiatives to enhance the business environment and boost R&D investment. I think of the national governance framework to streamline fees and levies in Saudi Arabia. Or stronger intellectual property laws in the UAE.

As a result, patent applications from the GCC states have tripled in the last decade.

But there is more to do. Upgrading the regulatory environment and ensuring a level playing field can help further raise R&D investment.

The third priority: deepen regional economic integration.

By pooling resources and working more closely together, GCC countries can increase their market size, become more efficient, and make the regional economy more competitive.

All of this can amplify the gains from economic diversification and broader structural reforms.

We also know that intra-regional trade can boost economic growth. We have seen trade among GCC countries grow rapidly—goods exports within the GCC have tripled in the past decade to more than $70 billion.

But they are still less than 10 percent of the GCC states’ total global exports, which is significantly below the 50–60 percent shares seen for the EU.

Increasing trade among GCC countries will require better-harmonized regulations and standards, improved transportation networks, and more diversified economies.

By deepening regional ties, the GCC can be a leader in cooperation and connectivity.

And by continuing to make progress in these areas, GCC countries can continue to be a bright spot, build resilience, and chart a prosperous course for the future.

Thank you.