Macro-Drivers Of Gulf Co-operation Council Countrys Economic Risk

Abstract

This study provides the first empirical analysis of the Gulf Co-operation Council (GCC), which explores the macro-drivers of each country's economic risk. It examined the economic risk across GCCs countries over the period of January 2000 to December 2011. The study included all GCC countries: Kingdom of Saudi Arabia (KSA), Kuwait, United Arab of Emirates (UAE), Qatar, Sultanate of Oman (Oman), and Kingdom of Bahrain (Bahrain).

In terms of economic risk, results revealed that Kuwait and UAE represented a safe land for local and international investment to be allocated in GCC. This could be attributed to their very high rating and stability of economic systems in comparison with other GCC countries. Results also revealed that KSA, Qatar and Bahrain were considered countries with an instable economic system in comparison with other GCC countries. Moreover, findings revealed that each GCC country was a unique case in terms of its drivers of economic risk. Results also indicated that while KSAs economic risk was driven by the instability of its budget balance as a percentage of GDP, Kuwaits economic risk was driven by the low real GDP growth, and UAEs economic risk was driven by the instable GDP per capita. As for the economic risk of Qatar, Oman, and Bahrain, it was driven by the illiquidity of the economy as measured by the current account as a percentage of GDP.