Karen E. Young is Resident Scholar, American Enterprise Institute (Karen.Young@AEI.org) and author of Twin Crises Deepen Gulf States’ Policy Competition and Independence

In ‘Twin Crises Deepen Gulf States’ Policy Competition and Independence’, I argue that, for the Gulf Arab states, the twin crises of the Covid-19 pandemic and the collapse of oil prices in 2020 have accelerated trends already in motion. For finance ministers, it must feel like bailing out a sinking boat with a tin cup.

There will be no simple policy solution to the structural pressures for fiscal reform. The oil exporters of the Gulf Cooperation Council (GCC), even the wealthier ones like the United Arab Emirates, simply have higher spending patterns than their current revenues support.  But the Covid-19 pandemic has called upon states to intervene and support domestic economies, making the competing priorities of shrinking public sector payrolls and stimulating domestic demand all the more difficult. What emerges are trade-offs that reveal leadership priorities, and important distinctions within the ever-weakening body of the GCC on a range of policies from immigration, labor markets, tax and sovereign debt.

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