What to expect in the Gulf Cooperation Countries in 2021: Key trends to watch

What to expect in the Gulf Cooperation Countries in 2021: Key trends to watch

The history of the Gulf Cooperation Council is a story of the equally blessing and cursing natural resources, monarchies and Muslim Brotherhood. Since its establishment in 1981, this political and economic union has been subject to heightened economic pressures and long-standing geopolitical dynamics. This article explores the key trends to expect from the partnership of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates throughout 2021.

Diversification of rentier states and loss of expatriate labour

The necessity of economic diversification has been on the agenda of GCC states for a long time – ever since environmental concerns have led to the search for more sustainable energy sources as oil reserves are depleting. Yet, the economic slowdown caused by the pandemic has renewed this necessity being that record debt levels were observed last year. The fall of oil prices risks increasing the budget deficit of GCC states with Brent crude prices falling from $64 per barrel at the start of 2020 to a low of $23 in April 2020. The secondary economic activities in the region, such as construction and infrastructure development, are also financed through the income of oil and gas. All throughout the rentier states in the Gulf area, an enhanced economic structural reform may be on the horizon.


A recent research by S&P Global also observes that the GCC states population have declined about 4% in 2020 due to an exodus of expatriates and expects further diminution in the upcoming years due to workforce nationalization policies. In Kuwait alone, the work permit of 19,995 expats were cancelled in the last two months. The exodus of expatriates from the GCC in 2021 could substantially impact the efforts to diversify the economy from its heavy reliance on the hydrocarbon sector and pose additional challenges to growing non-oil sectors. 

Oman, being one of the weakest nations within the Gulf area, was hit hardest by the fluctuation and plunging of oil prices caused by the pandemic. As part of the Vision 2040, Oman already announced it is planning to grant longer residencies for foreign investors within their goal of diversifying the economy from oil. Henceforth, it may also be expected that GCC states will introduce additional economic and social reforms in 2021 to foster human capital in order to reverse the current loss of expatriate labour.

Saudi Arabia’s change in power

As King Salman bin Adel Aziz al-Saud’s reign is ending in 2021, Crown Prince Mohammed bin Salman al-Saud is likely to officially succeed his elderly father. The expected heir Mohammed Bin Nayef (61) was swept aside in 2017, and it is expected that King Salman will abdicate to ensure the succession of his son. This will provide him the opportunity to change Saudi Arabia and reshape the kingdom. 

On the one hand, his reign may bring popular social reforms to Saudi Arabia. In his role as deputy Prime Minister, the Crown Prince removed the ban against women driving and weakened the male guardianship system in 2019. In continuation of these reforms, his reign could lead the way for much-needed women’s rights development in 2021, which could also expand in other GCC states. On the other hand, Crown Prince Mohammed may drive a wedge between Saudi’s relations with the US and Turkey. While the Trump administration praised the young heir, Biden is more likely to sideline his leadership. The murder of journalist Jamal Khashoggi in Istanbul in 2018, which the CIA has reportedly concluded was ordered by Prince Mohammed, would also contribute to this divergence.

His leadership is likely to be characterized by an economic diversification plan as a continuation of his Vision 2030. The initiative focuses on reducing the nation’s dependence on oil and diversifying its economy by increasing non-oil international trade and expanding other public sectors such as tourism and infrastructure.

The new era with Salman bin Adel may also entail a normalisation deal with Israel. While Saudi Arabia has taken a strong stance in the Israeli-Palestinian conflict and has supported the Muslim brotherhood, the government is showing signals that approve the decisions taken by Bahrain, Sudan and the United Arab Emirates that normalise their ties with Israel. As Vision 2021 also cites that the Kingdom hopes to enhance its “security and interests”, it would not be unexpected that throughout 2021 Saudi Arabia would build closer economic or diplomatic ties with Israel despite previous resistance.

Concluding remarks:

The year 2021 is likely to enhance the efforts to diversify the GCC economies away from oil as the fall of prices caused by the pandemic has exacerbated the debt levels and increased the urgency to expand other industries. GCC states may also introduce social reforms in 2021 to foster human capital in order to reverse the current loss of expatriate labour that intensify diversification challenges. This will be especially relevant for the United Arab Emirates, Kuwait and Qatar where expatriates as part of the population are the highest and workforce is heavily dependent on expat labour. It may also be forecasted that 2021 will be the year Crown Prince Mohammed bin Salman al-Saud officially succeeds his father King Salman in Saudi Arabia. The intervention led by MBS in Yemen and his link to Khashoggi’s murder does not set a good reputation for the Crown Prince in the international arena. It is very likely that Saudi Arabia’s relations with the US and Turkey may diverge in 2021 and that the kingdom will step forward to set a normalisation deal with Israel. Lastly, the Gulf states seemed to be on the forefront in the rollout of Covid-19 jabs in early January. The success of their vaccination policy will demonstrate the GCC’s ability and speed for economic recovery. 


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