Economic Integration of GCC Countries: Developments Since

Economic Integration of GCC Countries: Latest Developments Since 2010

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It is important to examine the Gulf Cooperation Council (GCC) Key Economic Indicators. Primarily, 2014 Key economic indicators will present statistical information, which will seek to foster economic determination and engineer the determination of current and future performances. A collective economic indicator examines aggregate earning reports, list of economic summaries relating to this region and as well as, reflecting on various macroeconomic indices. This report will prove that the GCC (2014) economic indicators are collective in answering aggregate macroeconomic challenges. This study is a collective possible research leading to the construction of key economic indicators (2014) analysis as adopted by GCC partners. GCC economies have been growing tremendously in the past ten years. This study focuses solely on some of the serious economic developments and polices evident in the region in the past four years. These may be considered as the key success factors even with the inherent economic meltdowns around the globe.


Previous research in relation to GCC economic indicators have been fostered in examining interrelation of members like customs union. However, there has been trivial research examining the level of Key economic indicators of member states. Therefore, in this regard, it is positive to examine the Key economic indicators of the union. The GCC is an economic and a political amalgamation comprised of six member states like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. The union economic policies seek to enhance cooperation within the private sectors. Secondly, it also fosters scientific and technical progress in the vital industries, mining, water, agriculture and service industry and the establishment of scientific research centers. Thirdly, the organization seeks to set-up joint ventures relating to plethora of industry. This research is seconded by Al-Busaidi (10-18, 26-33) who presents a plethora of justifications seconding the above named objectives. In addition, considerate research from Ziaei (406-417) will seek to provide empirical justification in relation to this commencing research. Cevik et al. (2013) seconded by Espinoza et al. examine various macroeconomic policies which are applicable in this study.

Literature Review

Six key economic indicators and Main economic policies

International Accounts

Espinoza (4) reflects international accounts as the leading Key economic indicator in GCC countries. GCC countries financial structure applies an interest rate of equity price data. Financial integration is vital in approaching the nature of business activities in the countries. The underlying knowledge is that; that GCC countries belong to regional economic bodies; for instance, Oil Producing Economic countries OPEC. In this regard, market structure and volume of capital flows attempts to rely on an analysis of price data. In fact, through this indicator, GCC countries are in a better position for a greater financial integration. Pricing remains a fundamental consideration in GCC countries. It is through this macroeconomic tool that the GCC countries are capable of operation in desirable economic threshold. Market and volume data remain a second fundamental consideration in this study. For example, the GCC operates an open-door-policy while leading economies like the UAE remains a leading importer of the labor force.

Additionally, it is good to note that the leading product being pursued by GCC countries is Oil. However, recently, the service and manufacturing sector are gaining significant influence. As a result, international accounts present a desirable balance of trade mechanism. Madura (49) explains how exchange rates may correct a balance of trade deficit. In this case, the floating exchange rate is applied to bridge the gap between the balances of the leading exporters of a product. As a regard, it is necessary to access the balance of trade deficits that the GCC countries are inclined to comply. The economic goal of GCC organization is to ensure that net deficit is much lower as compared to net incomes. Therefore, the greater volume of foreign demand of products is vital in offsetting the domestic necessities of income. Although there is much debate revolving in GCC countries trying to justify that the exchange rates may not be an appropriate correction for a balance of trade, there is empirical evidence attempting to justify that fairer terms of trade are a key economic indicator currently being pursued by GCC country.

In GCC countries, applying tools like deflation (a stated earlier OPEC) often achieve aggregate macroeconomic threshold since countries can reduce their prices and remain competitive. However, lowering of prices does not happen in the GCC jurisdiction, but to trade happening outside the jurisdiction. Although, it is good to acknowledge that other considerations; for instance, the GATT system is a resolute strategy of minimizing the aggregate price-lowering stratagem. This year, the GCC came out broadly to institute the desired economic prices for their products. Critical concerns of their products include restating pricing of major products- Oil. In this regard, the GCC is instrumental in aiding countries to develop mechanisms to develop their currency and make it competitive.

Consumption and Investment

In GCC countries, there has been growing concern on the dwindling source of raw materials. Most GCC countries enjoy a handful of natural resources; these are the Air, the Sun, the Sea, the Sand and the Oil and its other products. However, oil seems to be most beneficial beating the rest constructively. Oil in this case, is a specialized product although its volumes are decreasing. As a result, this year GCC has advised member states to begin pursuing other alternatives. Possible alternatives include consistent investments in the manufacturing and hospitality industry. Besides, such an investment will inversely encourage the expansion of consumption patterns. In GCC countries, there has been a growing necessity to expand regional financing and consumption and other investments. The underlying reason is that in GCC countries, there are no bilateral financial flows between GCC and regional countries. In fact, almost all GCC countries export and import similar products. Therefore, the return rate on investment in relation to GCC products is naturally constrained. So in this regard, there is a need to pursue an economic indicator steered towards consumption and investments (Ilahi et al., 6).

UAE is exemplifying this persuasion by the establishment of policies, which are collectively applied by its economic jurisdiction. Some of the fundamental UAE industrial investments include hospitality, manufacturing, ICT, and financial services. These investments are meant to offset the general deficit created by the balance of trade deficits. In this regard, there is a general desire to expand remittances being offered to incoming countries. In fact, remittances are vital in aiding GCC countries on a collective growth strategy. The Net income is vital in facilitating the physical capital and the expansion of capital (financial, human and machinery) to pursue oriental objectives seeking to foster financial systems. Indeed, in countries; for instance, Saudi and UAE, there is strong justification of remittances boosting general consumption levels. Key trading patterns include the United States, European Union, China, India, and Africa. Therefore, it is better to argue that although the economy is not consumption driven, there is eminent regard seeking to foster consumption driven strategy since there is fear of key trading product dwindling from the market.

Legrenzi et al. (66) exemplifies these trading patterns and their value in offsetting GCC’s consumption deficits cumulatively. With these findings, it is good to identify that GCC of recent has devised a methodology of increasing foreign consumption and rechanneling it to the net balance of domestic investments. Critical investments include real estate, tourism, banking, and capital markets. However, according to GCC indices there are considerable current accounts that should be the center of interest. In fact, economies such as Dubai (due to a bloated infrastructure) are still underperforming compared to global indices. Possibly, GCC countries and central banks have ensured a consistent investment in foreign direct reserves. In this case, foreign direct reserves are meant to minimize the consumption deficit in the countries. Most GCC economies are currently being driven by external factors; however, competition is proving challenging since there is a general growing fear on investment shift. South East Asia and Africa are proving to be future stronger investment destinations compared to UAE. This year, GCC are collectively encouraging member states to foster the spirit of domestic consumption a policy being pursued by a rivaling Chinese economy. This will not only reduce the total trade deficit in GCC countries, but as well expand the investment through macroeconomic balances of investments and consumption.

Labor Force and Demography

Goyal et al. (4) shows that local economic challenges have hampered GCC’s economic prosperity. In fact, labor orientation is proving a menace and as well locking foreign direct investments. Indeed, policymakers in GCC countries cannot cast the right balance between pressures of a rapidly from a local labor force and maintaining a flexible policy is looking at techniques of hiring expatriate workers. Although this stratagem is appropriate because expatriate tend to repatriate significant amounts of resources to foreign destinations, a growing concern seeks to justify the validity of this initiative. The underlying reason is that GCC native labors are currently facing competition and unemployment is proving eminent. This indicator is inopportune when focusing on other indicators.

There is also a dangerous debt in . They have no choice but to implement the policies. Countries like Bahrain, Saudi Arabia, and Oman are facing pressing challenges when it comes to labor. In these countries, national workforce has been rendered inopportune to deliver since foreign labor (with better services at cheaper rates) especially from India and Africa have recently flocked the labor market. Therefore, GCC is currently pursuing policies, which will seek to replace foreign workers with local workers. To accomplish this, GCC is advising member states to pursue a combination of mandatory of market-based and as well, policies which will seek to promote non-oil economic growth.

Although the population of the GCC is relatively small, there has been an outcry of expatriate competition. High fertility is primarily responsible for a growing population. Saudi is still the largest population powering a 30.19 million people, according to 2013 indices. Seconded by, United Arab Emirates, which is by 8.6 million, according to 2013 indices. Thirdly, Oman occupies this position with a population of 3.9 million. Fourthly, Kuwait has a population 3.8 million, while Qatar is fifth with a population 1.9 million people. Bahrain ends the list with 1.5 million people.

Now, according to this population hegemony, it is notable to argue that these populations are relatively small compared to neighboring populations; for instance, India, Iran and Egypt which have relatively bigger. Second, the social and religious rigidities have constrained these populations from pursuing considerate macroeconomic goals. As a result, larger populations are not absorbed into the general economy. Moreover, it is good to note that a large population is 0-14, and not to mention that the dependency rate is still picketing at 86% in Saudi Arabia. This is a clear indication that the larger native population of GCC countries is perhaps impoverished or largely unproductive (Al-Busaidi, 29).

Besides, there is growing number of expatriates coming, working, and staying in GCC countries. The 70s and 80s oil boom resulted in a subsequent demand for foreign labor by application of the open door policy to welcome foreign investors and expatriates. As well, shortage of skilled labor has continuously presented justifiable logistics of adapting to a foreign driven economic policy. Recent research has attempted to examine the advent of elastic supply of expatriate workers, and internationally competitive wages on the nature of flexible contracts have contributed to preempt the deterioration in competitiveness of non-oil sectors and indeed, observed in economies of richer oil councils. Therefore, in relation to labor, non-oil sectors are proving a considerate resilience points seeking to foster the creation of opportunities all geared towards expanding the demand of local labor opportunities.

Incomes indicator

Although there is a significant disparity in income inequalities amongst member states, it is notable to note that the GCC countries are almost operating in the same threshold when it comes to native orientation. According to IMF indices (Al-Busaidi, 27) Qatar topples in the list of GCC strongest incomes. The country has a resounding 100, 260 U.S. dollars in Purchasing Power Parity (PPP). Kuwait comes second with a strong of 51,709 U.S. dollars PPP and has a growing manufacturing sector. United Arab Emirates comes third in this with 43,875 U.S. dollars PPP, though it is good to note that there is a large of expatriates living in this country. Saudi Arabia comes fourth with a figure of 24, 847 U.S. PPP dollars according to 2012 indices. The country has a large population of dependants. Oman comes fifth with U.S.$23, 000 PPP, and the figure is growing annually. Bahrain comes sixth with a figure of U.S.$22, 000 PPP. From this figure, it is good to note that the GCC countries are far from the poverty threshold. In fact, Bahrain is positioned at 37 out of the possible 182 countries. However, there are significant income inequalities of citizens. As stated earlier in this discussion, the majority of the native population is dependent to family members or government based income policies (Al-Busaidi, 16).

GCC applies competitiveness of incomes to determine the aggregate consumption of natural resources. Therefore, according to reports, there has been growing concerns whether the available natural resources are servicing the local economies collectively. GCC resolute for Business Competitiveness Index (BCI) to determine the whether the available infrastructure, labor relates positively to with natural resource. In the calculation, the BCI-based system has managed to exemplify that inadequate systems of education, trivial capital access, inadequate infrastructure and poor innovative potential are chiefly responsible for the low development of incomes. In any case, GCC countries are living below their actual potential. While some countries like Qatar and United Arab Emirates seems to , the situation cannot be considered perfect since most of these incomes are enjoying by either rich individuals or highly skilled expatriates (Goyal et al. 18).

Civeki (62) establishes that the problem with subsequent income inequalities is the constraint of the second economic indicator, which should enable local economies to power their policies to foster consumption. Recently, GCC has identified that actual investments are not salvaging local economies sufficiently if the technology remains a hurdle. Ramady (126) supports this opinion in what he argues that high-income countries often focus their efforts in pursuing technological innovations. Technology will seek to expand the aggregate mobilization of resources, and as well, GCC countries will stand a better position to export technology. According to World Economic Forum, country competitiveness is measured by Global competitive Index in comparison to Business Competitiveness. Therefore, these determinations are deliberated base on the pillars of the economy, which among others include education, health, economic environment, infrastructure, labor efficiency, financial market, technological readiness, business sophistications, market size and innovations (Zieai, 411).

Although significant disparities in the nature of competitiveness exist, there is a coherent in-coordination of the pillars. While nations like Qatar and UAE are currently pursuing robust policies in relation to infrastructure and financial market, the acute absence education and labor driven policies is evident. Quit significant number of citizens are dependents due to the subsequent failures of these policies. Again, the disparity in macro-economic indicators is voluntary. For instance, a country like Bahrain Percentage change in competitiveness index is at 31 while UAE’s stands 39%. These disparities are primarily responsible of persuasion of similar policies, but at different thresholds.

Housing Finance

Based on the earlier discussion being pursued by this report, it is legitimate to rethink in line with the quality of standards of living that GCC organization desires in this year. As an indicator, housing finance presents the real dispensation of qualities and standards of living of given region. GCC population has increased by a compound annual rate of 2.33% on average. This is relatively bigger against the normal world rate of 1.17%. However, the GDP growth rate stands at 6.4% and subsequently the GCC prosperity rate is at 4.17%. The list of GDP stands as, Saudi Arabia in 745, 273, United Arab Emirates in 383, 799, Kuwait 185, 319, Qatar in 172, 982, Oman 80,571 and Bahrain terminates at 27,030. These listings are based on 2012 indices and figures are presented in U.S.$. According to this figures based on the population listed above, it is good to justify that the distribution of prosperity of generated within the GCC region is possible to achieve equitable standards in relation to better housing standards (Ramady, 122),

However, it is sad to note that no country within the GCC has successfully developed the private fixed income markets vital in initializing the mortgage scheme. In fact, in contrast, within the GCC there have been headline issues by corporate entities to develop Islamic Financial Instruments. Thus, in GCC jurisdiction treasury bills and bonds have remained distanced and as well, accounts for a small share of the total GDP (Rocha, 37). The World Bank (46) argues that a well-developed government securities market provides a reliable benchmarking yield curve for pricing and development of private instruments. Nonetheless, the controversy presented here augments that experienced dealers, dealer financing, brokers, and future and options market amongst are imperative in aiding governments to mobilizing governments to pursue government friendly policies that will seek to mobilize resources (Goyal et al. 32).

Again, in this year, GCC pursues these indicators since it holds the view that equity market of capitalization is high in many countries and especially in the GCC. Initial public offerings (IPOs) and mandatory-based listings of financial institutions have prompted the development of aggregate markets. In fact, the GCC is compelled by the view that the equity markets are structurally responsible for the development infrastructure. Hence, when it comes to housing, the GCC is encouraging members to pursue collective government engineered policies. There is a need to distance from total private sectors driven policies. In any case, private companies must support governments’ policies related to mortgages and not leading the process.


After the 2009 European and American financial meltdown, it was appropriate to pursue economic goals that would seek to second the stabilization of prices amongst member states. The history of pricing is deeply waged on malfunctioning amongst member states. The fear arises from GCC’s fragile economies. In any case, it is possible to import elements like inflation to stable economies. At 1981, the GCC reached an agreement on the necessity to develop various economic and administrative areas by fostering relative macroeconomic policies. Subsequently, the 1981 agreement was revised in 2001, this time round introducing Customs Union. As a result, the U.S. dollar was applied as a collective currency union because of its stability (Cevik et al. 44).

Ziaei (409) argues that these commencements were vital since they aided the GCC to establish a price ceiling and price floors to manage inflationary or deflationary tendencies. Some of the prerequisites being pursued include inflationary rates to a positive of two percent. This also applied to deflationary rates. Secondly, the appointment of fiscal deficit and this was not meant to exceed 3% of GDP. Thirdly, the public debt in relation to GDP ratios was not to exceed 60%. These stratagems were vital in minimizing the aggregate inflationary conditions that different member states could encounter. As part of the mitigation policy, it was necessary to reduce transaction cost and induce resource allocation. This would encourage countries to specialize in various industries besides fostering the spirit of competition and comparative advantage (Cevik, 49).

After the 2002 economic oil boom, inflation in GCC countries has been increasing. Inflation is primarily responsible for decreasing the total purchasing power of consumers. Inversely, the pegged dollar has been losing influence against major currencies; for instance, the Euro is proving very competitive. Hence, the GCC is currently being challenged by decreased purchasing power. In addition, U.S.’ interest rates have been going down favoring their exports against their imports. Therefore, traditional oil sales are facing significant challenges, in relation to this market. In fact, the GCC pegging its prices to the U.S. dollar means that the GCC is following the U.S. Federal Reserve policies — which are dangerous anyway. As a result, the GCC has pursued robust policies favoring improved economic like increasing exports and decreasing imports. Part of the core initiatives includes pursuing a monetary policy that will seek to reduce foreign direct shocks (Goyal et al. 98).

Recently, the GCC revised traditional policies with a rapid approach against aspects such as corruption. The monetary policy leads the pack. The GCC monetary policy (though currencies are still pegged to the U.S. dollar) seeks to increase interest rates on the total cost of borrowing and discourage consumers from borrowing. Secondly, GCC policies will be instrumental in reducing the interest rates related to the borrowing. This will seek to encourage borrowing for investment destinations and not necessary consumption. This is achieved by lowering interest for capital borrowing. GCC is also encouraging members to lower their interest rates so that disposable income threshold can become affordable. Eventually, citizens will be able to borrow the available mortgage policies. Fourthly, lower interests will lower the value of the exchange and favoring exports against imports.


This report has proved that the current Key Economic indicators being pursued by Gulf Cooperation Council are resounding enough to answer current challenges. The report has enlisted six economic indicators. In this report, critical concern has been directed towards macroeconomic efforts being pursued by GCC. Critical indicators have been initiated to revise customs, tariffs as well as, a collective monetary policy. The report has also examined critical macroeconomic initiatives courtesy of income, and housing, which GCC countries seek to apply in the larger expansion of economic policies.

Work Cited

Al-Busaidi, Samir. “Modelling Macroeconomic Shocks in the GCC: Is Monetary Unification Viable?” Review of Middle East Economics and Finance 9.1 (2013): 1-36

Cevik, Serhan, and Katerina Teksoz. “Lost In Transmission? The Effectiveness Of Monetary Policy Transmission Channels In The GCC Countries.” Middle East Development Journal 05.03 (2013): 1350018. Print

Espinoza, Raphael A, Ghada Fayad, and A Prasad. The Macroeconomics of the Arab States of the Gulf. 2013. Print

Espinoza, Raphael. Williams, Oral., & Prasad, Ananthakrishnan. Regional Financial Integration in the GCC. New York: International Monetary Fund, 2010. Print.

Goyal, Rishi, Ugo Fasano-Filho, and Rishi Goyal. Emerging Strains in GCC Labor Markets. Washington, D.C: International Monetary Fund, 2004. Internet resource

Ilahi, Nadeem, & Shendy, Riham. Do the Gulf Oil-Producing Countries Influence Regional Growth? The Impact of Financial and Remittance Flows. New York: International Monetary Fund, 2008. Print

Legrenzi, Matteo, and Bessma Momani. of the Gulf: Oil, Finance, and Institutions. Farnham, Surrey, England: Ashgate Pub, 2011. Internet resource

Madura, Jeff. International Financial Management. New York: Cengage Learning, 2014. Print.

Ramady, MA. The GCC Economies: Stepping Up to Future Challenges. New York: Springer Science+Business Media, 2012. Internet resource

Rocha, Roberto R, , and Subika Farazi. Financial Access and Stability: A Road Map for the Middle East and North Africa. Washington, D.C: World Bank, 2011. Print

World Economic Outlook, September 2003: Public Debt in Emerging Markets. Washington, DC: International Monetary Fund (IMF, 2003. Print

Ziaei, Sayyed Mahdi. “Evaluating the Effects of Monetary Policy Shocks on Aggregate Demand Components in GCC Countries: Evidence from Svar.” The Journal of Developing Areas 48.1 (2014): 405-423