Riyadh/Kuwait: The Kuwaiti Emir (leader), Sheikh Sabah Al-Ahmad Al-Sabah, has warned that Kuwait’s economy may suffer severe blows due to the plunge in the oil prices and the reduction in investments, and hence, the dependency on crude oil must be reduced. Kuwait depends on oil for more than 50% of its GDP. While the leader of Kuwait is expressing concerns regarding the financial blows, analysts across the globe have also started making forecasts about the Middle Eastern nations, and warned that the declining oil rates may hit them harder than the Coronavirus pandemic.
The oil prices have slid between $20 and $30 per barrel in global markets. Since the new Coronavirus is not under control yet, its influence show signs of persisting till the next year. As a result, a significant rise in the crude oil price is less probable. The Middle Eastern countries therefore will not only feel its blows, but it appears that they may also have to brace for its economic, social and political consequences.
Kuwait is one of the leading countries in the Gulf, which relies on oil. The remark by its leader, which stated that they cannot merely depend on crude oil, portrays the reality of a majority of the oil-dependent economies in the region. In 2014 and soon after, the oil prices had sharply plunged. During that time, the economies of several oil-rich Gulf countries had started hitting rock bottom.
Later, however, the Gulf leaders assured that the oil prices would rise soon and the situation would improve. Although the Gulf leaders are lately hinting at other ways to improve the state of the economy instead of bringing positive reforms in the oil industry. The reason behind the change, can be primarily attributed to blows the economy felt due to the fall in the oil rates.
The foreign reserves of Saudi Arabia, one of the leading countries in the Middle East, have fallen to the lowest levels seen in a decade. Saudi Arabia’s budget deficit has crossed $9 billion in the first quarter of this year itself. The United Arab Emirates (UAE) has stopped providing new employment in the government sector. Also, Qatar has halted projects worth approximately $8 billion. On the other hand, the World Bank has warned that Iraq’s economy might shrink by almost 10%.
The economic tremours are only the beginning, as social and political effects are not yet entirely visible. There is a thick possibility that the ongoing protests in Iraq and Lebanon might spread in the Gulf countries. Before the truth about the COVID-19 pandemic has surfaced, a few Middle Eastern analysts have already warned that the present conditions were conducive for the second Arab Spring. Moreover, the fall in the oil prices might further accelerate the Arab Spring.