Qatar has 88% of its employed nationals working for the public sector, even as the Gulf economies face twin challenges of creating adequate jobs for their nationals and the possibility of government budgets slipping into sizeable deficit, according to IBQ.
The UAE had 85% of its employed nationals in state service, followed by Kuwait (82%), Saudi Arabia (50%) and Bahrain (30%).
“Clearly, the ability of the public sector to absorb new entrants into the labour force will be increasingly limited in the future,” said the IBQ report.
Apprehending that deficits would be the future challenge for the GCC countries, it said the rising trend of public spending “is likely to limit government’s capacity and willingness to respond to economic difficulties in the future and increase the possibility of budgets falling into deficit if oil prices decline.”
The most recent oil boom that started in early 2003 and lasted for five consecutive years lured Gulf governments to expand public spending at unprecedented pace. “Annual growth in spending average 16% over the last five years and is expected to expand by a further 12% in 2010,” it added.
These two challenges, according to IBQ, could be addressed by paving the way for the private sector to play a larger role in the economy, for which the government should introduce policies that make it easier for the private sector to do business and remove unnecessary impediments.
It said the GCC economies have managed to escape the fallout of the global economic and financial crisis at a relatively low cost, partly due to their strong financial positions that enabled the adoption of stimulus packages to support economic growth.
Undoubtedly, the recent crisis has demonstrated the importance of local fiscal policies and direct government intervention in countering cyclical downturns in the short run, IBQ said.
“But other than providing temporary support, fiscal policies should not be viewed as a substitute for enhancing the competitive and fundamentals of domestic economies. As such, supporting the resilience of the regional economies in the face of anticipated future shocks should be prioritised,” it said.
Unfortunately and despite the availability of ample resources, the progress of Gulf economies in achieving their visions and strategic objectives is moving very slowly, especially those pertaining to the reduction of the region’s heavy dependence on the hydrocarbon sector through economic diversification.
“Experience shows that the achievement of these targets requires the creation of attractive business environment, which has yet to materialise throughout the region,” it added.
Follow us on our social media channels: