(P)GCC Economy Hit Hard by Trump Victory

As stock markets in the (Persian) Gulf Cooperation Council states (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman) fell sharply along with global bourses in reaction to Donald Trump's dramatic victory on Wednesday, experts believe his presidency could have far-reaching impact on the revival of the region's oil economies while unnerving the markets short-term.

Trump's pledge to lift restrictions on $50 trillion of untapped energy resources such as shale energy and natural gas could potentially add to an already over-supplied market and have an adverse effect on prices, one analyst said, Albawaba reported.

In a swift reaction to the unexpected poll outcome, markets around the globe have tumbled with $3 trillion wiped off the value of stocks.

However, analysts, believing such market convulsions have only short-term impact, predicted a rebound of the greenback once the currency markets come to grips with the new reality.

While Dubai's market fell 0.84% as almost all traded shares pulled back, Abu Dhabi's index was down 0.56% as two-thirds of the traded shares dropped. Saudi Arabia's index pulled back 2.7% in the first 10 minutes of trade as a little over nine-tenths of traded shares declined, but closed 0.8% up. In Doha, nine-tenths of the top 20 most valuable shares pulled back, dragging the index down 0.1%.

Saudi Future in Doubt

As Saudi Arabia witnesses one of its toughest economic challenges in recent history, the government has launched both Vision 2030 and the National Transformation Plan 2020 to aid in shaping a new, more diversified, robust and sustainable economy. The vision has mainly been fueled by the recent drop in oil prices which historically uplifted the Saudi economy over the past decades reaching record highs of $145 a barrel in 2008.

With oil prices barely keeping close to $50 a barrel, more than half of the peak levels two years ago ($115), Saudi Arabia is left with the question: "How can we sustain our economy when over 90% of revenues depend on a depleting resource that’s also dropping in price?"

The very definition of sustainable development is to meet the needs of today without compromising the needs of future generations. As the Saudi government starts to take noticeable and transformational actions, a lot of companies in the private sector faced with the same predicament, are asking the same question: "How can we be sustainable?"

Now is the opportune time to tackle this question head on and address the main dimensions of sustainability that include social and environmental sustainability, in addition to the common question of economic sustainability.

It is no longer possible for companies to simply meet the needs of today and wish the best for the future. A proactive approach towards the fundamentals of economic, social and environmental sustainability means companies today have to address key issues such as addressing a locally competitive workforce, empowered local suppliers, responsible environmental practices, solid corporate governance and new and improved solutions for social development.

The very livelihood of companies in Saudi Arabia is now in serious doubt.

Oman Downgraded

Ratings agency S&P has downgraded its outlook for Oman from stable to negative, it said in its latest report.

S&P expects Oman’s fiscal deficit to “significantly” widen to around 20% of GDP in 2016, compared with its earlier estimate of 13% of GDP.

However, the sultanate’s net fiscal and external asset positions continue to support the ratings on Oman at the current level, it added.

Hence, it affirmed the ‘BBB-/A-3’ long- and short-term foreign and local currency sovereign credit ratings.

“The outlook revision reflects that Oman’s fiscal consolidation could take longer than we expect,” the agency said.

“We meanwhile assume that government financing needs will largely be funded externally due to the sultanate’s narrow domestic capital markets.

“As a result, the economy’s external debt could exceed its liquid external assets by more than we anticipate, thereby limiting buffers to offset external pressures,” it added.