Dutch Disease and the Future of the GCC Economies

Abstract

Dutch disease happens when a country's economy becomes overly reliant on the export of a single natural resource. This can have various negative implications, including the weakening of other sectors of the economy, a rise in the currency's value, and an increase in the cost of living. This research investigates the evidence for Dutch Disease in the Gulf Cooperation Council (GCC) nations. According to the study's findings, there is some indication that Dutch Disease exists in these nations. The positive connections between gas production, raw petroleum output, and GDP suggest that increasing production of these commodities leads to economic expansion, as measured by GDP. However, the considerable negative link between the percentage of non-petroleum exports and the consumer price index shows that the nonpetroleum export industry tends to diminish as gas and petroleum output grows. The study's conclusions have a variety of ramifications for the GCC countries. For starters, it proposes that the government avoid using oil and gas earnings to fuel excessive government expenditure. That might lead to Dutch Disease and undermine the economy's nonoil sector. Second, the government should adopt initiatives to encourage non-oil exports. This might include initiatives that encourage non-oil exports or aid in diversifying the economy away from natural resources.