Price of oil has a significant influence on economic growth and development in both developed and developing countries, but its impact on countries that depend on oil as their main export and principal source of income, is far greater and needs to be tackled on different fronts. This was the consensus that emerged at the end of a three-day regional conference of economists in Doha, Qatar on Friday.
Though volatility in oil price affects among others, energy production, manufacturing costs, consumer spending and exchange rate mechanism, which in turn affects international trade of many countries, their influence on oil producers is considerably more significant.
For the Gulf Cooperation Council (GCC) states that rely heavily on oil income, any wide fluctuation in its price has a proportionately larger impact on their growth and development. Moreover, with many markets in the Middle-East and North Africa (MENA) region dependent on GCC states for lending support to their economies, through remittances, foreign aid and investment, as well as providing oil at concessional rates, the region as a whole is more sensitive to any large fluctuation in oil prices. In addition, research has also shown that oil price shocks are distorted in their impacts, with positive and negative shocks in oil prices of equal intensity having differential impacts on a given country’s economic growth.
Given its far-reaching and widespread consequence, the 15th International Conference of Middle East Economic Association (MEEA), hosted by the Doha Institute for Graduate Studies (DI) from 23 – 25 March, gained added significance. The three-day international event, themed ‘The Impact of Oil Price Changes on the Economic Growth and Development in the MENA Countries’, saw attendance by over 200 economic experts who presented numerous work papers and participated in nearly two dozen workshops.
This year's conference examined impact of the decline in oil prices on vital economic sectors in the MENA region. Economists at the event also analyzed the relationship between oil prices and fiscal and monetary policy modifications undertaken by central banks in the region.
Among the participants from Kuwait was Sulayman Al-Qudsi, researcher at the Kuwait Institute for Scientific Research (KISR), who urged GCC countries to adopt new economic policies, including diversifying income sources to confront the recent instability in global economy caused by strong fluctuation in oil prices.
Stressing the importance of data in decision making, Al-Qudsi, who published a research paper at the event, called on GCC countries to develop monthly economic indicators for decision makers in government and private sector. He also emphasized the importance of constantly monitoring indicators from around the world, particularly from the United States, Canada, Europe, China, and India.
Furthermore, he noted that rather than just depend on investment and labor as income increasing sources, the Gulf countries need to augment their income by enhancing productivity, including developing and improving national cadres and employing skilled labor.
Speaking on the final day of the three-day conference, Dean of the Doha Institute, Dr. Hassan Ali, said it was incumbent on MENA governments to pursue flexible economic policies that reflect the current plunge in oil prices, including reconsidering the pegging of many of their currencies to the US Dollar. He added that the region would continue to remain at the mercy of external shocks to oil prices, as long their economies relied totally on oil revenues.
Suggesting that one of the solutions to propping up wilting state budgets of GCC states would be to implement “national tax policies,” Dr. Ali added that this should be implemented along with cuts in state expenditures and stringent monitoring of capital flow in and out of the region’s financial markets.
He also emphasized the importance of diversifying economies and the crucial role that governments played in channeling investments so as to maintain sustainable development, while bolstering education, technology and innovation to spur economic growth in the MENA region.
The DI, founded in 2014 by the Arab Center for Research and Policy Studies, is an independent not-for-profit institute for learning, research and service in the fields of social sciences, humanities, public administration and development economics. It aims to fulfill needs of the Arab world through encouraging and preparing a new generation of academics, researchers and practitioners.
The MEEA is a private, non-profit, non-political organization of scholars interested in the study of the economies and economics of the Middle East. Its objectives include promoting high standard scholarship, facilitating communication among scholars through meetings and publications and promoting cooperation among persons and organization committed to its objectives.