The cascading effect of the ‘Great Lockdown’ disrupted global supply chains and commercial activity. It caused a cumulative loss of around $4 trillion of economic output in the global economy, shrinking global GDP by 4.4% in 2020, according to an IMF report.
As Jaykhosh Chidambaran states in his article, despite timely government intervention with fiscal stimulus and macroeconomic prudence, Gulf economies contracted by 6.1% in 2020, fiscal deficits soared to 9%, worsened by plummeting Brent crude prices to $23 per barrel in April 2020.
The need for diversification of GCC economies from oil revenues have intensified since the beginning of pandemic. It had started “cannibalizing” into the 2 trillion dollars’ worth of financial assets invested in sovereign wealth funds (SWF). It was created by GCC countries, for future generations, since the oil rush.
The IMF estimates that this conserved wealth will likely deplete by 2034, if Gulf states fail to pursue structural and financial reforms aimed at diversification from a “Carbon Economy”.
Could the “New Age” economy be “green”?
GCC economies could campaign for investments as manufacturing base for Electric Vehicles (EV), as the world will soon transition intogreener technologies and non-hydrocarbon mobility solutions.
A first mover advantage in the EV sector, touted as the industry of the future will restore the diminishing fortunes of the fossil fuel industry in the GCC.
Chidambaran advises the leaders of the region to invest heavily in “New Age” economy sectors. These could be artificial intelligence, machine learning, fintech, blockchain, cybersecurity, 3D printing and additive manufacturing, cloud computing etc. Gulf economy needs strategic collaboration with global leaders.
Clean, renewable and sustainable energy solutions harnessing wind and solar power are excellent diversifying options due to abundant, 365 days of sunlight and uninterrupted wind potential, expert concludes.
Green hydrogen and energy storage solutions like Lithium ion batteries are also sectors that are prospective in the future as inputs for non-carbon-based revenue models. Sustained economic growth is dependent on producing a wide basket of goods both for local consumption and international trade.