The Gulf countries, thanks to their dollars pegs (barring Kuwait), have been able to rely on the low interest rate stance of the US Federal Reserve as a source of relief during a protracted economic crisis. However, it is above all their fiscal policy activism that accounts for the resilience of these economies in the face of major global, as well as regional, shocks, the Jeddah-based National Commercial Bank (NCB) said in its GCC Economic Review for Q1, 2011.
Following the onset of the crisis, all the GCC (Gulf Cooperation Council) governments quickly stepped in to support aggregate demand and to ensure the largely uninterrupted continuation of their ambitious development agendas. Government expenditure has underpinned economic growth in the region at a time when private sector behavior has been characterized by persistent risk aversion and credit constraints. For instance in Saudi Arabia, public sector GDP growth in 2010 attained 5.9 percent, whereas the private sector mustered a much more modest, but still internationally respectable 3.7 percent.
In spite of growing optimism about the global recovery until recently, the Gulf governments have been slow to embrace explicit exit strategies, even though government budgets have typically projected far slower expenditure than revenue growth. On the whole, however, policymakers have typically recognized the exceptional uncertainty of the international environment and used continued fiscal stimulus spending to underpin confidence and growth. With the onset of a period of political instability in North Africa, this approach has left them in a position where policy continuity has once again presented itself as a logical response to the evolving circumstances.
No comments:
Post a Comment