The coronavirus pandemic is hitting Gulf Arab economies hard and emboldening the region’s dynastic rulers to push through unpopular fiscal measures that will impact their citizens. The question now is how long their resolve will last.
Saudi Arabia, the Arab world’s largest economy, announced a surprise tripling of value-added-taxes and trimmed allowances for government workers. Oman cut salaries of new state employees. Even in the United Arab Emirates, a financial and commercial hub with the Gulf’s most diversified economy, there are calls for overhauling a “rentier-state” model dependent on energy resources, state jobs and a foreign-majority private workforce.
Yet for all the talk of accelerating overdue changes, there were also moves to protect state jobs and shield nationals from cuts in the private sector, casting doubt on whether the downturn will trigger deeper reforms that outlive the crisis.
Oman has already called for foreigners to be replaced with nationals in government jobs, the UAE is preventing banks from firing citizens and Saudi Arabia’s finance minister alluded to state support for the kingdom’s workforce.
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