One year on: the GCC region's post-economic crisis prospects (page 4 of 4)

"The proposed monetary union should be accelerated to protect GCC economies from currency movements, to better maintain the financial stability of GCC country members, and to improve the depth and liquidity of financial markets," Shediac said.

- Financial sector robustness. GCC decision-makers should introduce a comprehensive set of policy measures to enhance the governance framework of the banking and financial sectors and strengthen coordination among regulators. In the medium term, they can broaden financial markets through the progressive introduction of new instruments to increase options for financing and deepen liquidity. They can also revitalize the insurance sector by modernizing its regulatory framework, thus enabling additional liquidity sources to fund economic development.

- Economic enablers. In this present cash-dry period, GCC countries can create a competitive edge that will serve them in the upturn by investing in promising capital-intensive industries, as well as innovative sectors where they can leverage competitive advantages. Moreover, the right set of policies, infrastructure, and institutional set-up will be critical to promote the development of small and medium enterprises (SMEs); powerful engines of growth and employment in slow economic cycles. . "In parallel, policymakers should rethink the legislative framework for reviving public-private partnerships, drawing on lessons learned from the crisis," commented Maroun.

 Structural reforms. Policymakers should accelerate the pace of key structural and social reforms and review public investment priorities in light of the challenges that emerged in the aftermath of the crisis. In particular, they should invest in regional infrastructure to increase economic integration and benefit from new markets. Continued liberalization and increased participation from the private-sector will be critical.

Conclusion

Even though a recovery is under way, most countries in the world will face severe macroeconomic imbalances and adverse effects on their social systems and living standards. GCC economies suffered mildly from the crisis and its consequences, due to their limited integration in the global financial system, the rapid recovery of oil prices and the various initiatives launched by respective governments. However, vulnerabilities in fiscal and economic management practices emerged in the last year, clearly calling for proactive policies to reduce risks and shield GCC economies from future adverse economic shocks.

Although their expectations for long-term growth remain positive, GCC governments need to accelerate the pace of their various structural reforms and put significant emphasis on strengthening their macro-financial stability.

"They must invent a new growth model to help them achieve their potential output and retrieve levels of growth comparable to pre-crisis achievements," stated Azour. The right path to recovery requires visionary leadership, swift planning, bold execution,, regional cooperation, and involvement in global governance initiatives.