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Structural reforms key to GCC growth and job creation

Dubai: The GCC economies need strong commitment to structural reforms to address its relatively high youth unemployment and boost efficiency in terms of national labour productivity, said Marie Owens Thomsen, Chief Economist, Crédit Agricole Private Banking, on Monday.

Fiscal and monetary policy options have been tested to their limits across the world in order to mitigate low growth, unemployment and high debt levels that resulted from the great recession. The new frontier of policy reforms lies in structural reforms according to Thomsen.

Although the GCC region with its strong macro fundamentals can be said to be one of the rising stars in the globalised economy, she said these economies too require strong structural reforms to fight the entrenched youth unemployment.

“The one avenue that has been left under-used is structural reform, and every country from mature to emerging economies need structural reform. Results from structural reform can be rapid and spectacular — China is the most shining example but the rise of Saudi Arabia, Qatar and the UAE as regional business centres in recent years are equally impressive,” said Thomsen.

The structural reforms in the GCC are focused on business enabling initiatives and investment in education and skill development. With more such reforms, growth and job creation is expected to pick up momentum in the region.

“The UAE climbed three ranks to 23rd place in the World Bank’s 2014 ‘Ease of Doing Business’ ranking. In this context, we would say that more structural reforms could catapult the GCC economies to their next level of development which will ultimately lead to more economic stability and prosperity in our new global economy,” said Thomsen.

Although the global economic recovery has begun, Thomsen said the great recession has lowered both current and future growth potential of mature economies.

While the US growth potential has dropped to 2 per cent this year from 3.6 per cent growth in 2000, most mature economies are facing similar fate with deflationary threat looming large over Eurozone.