Two other lessons seem clear. First, the growth of a country’s GDP is not the best way to evaluate how well a single-resource nation’s economy is performing. Rather, it’s important to measure the risk-adjusted real activity performance, taking into account such factors as growth volatility, exposure to exogenous shocks, and excessive economic concentration. These indicators can offer a more accurate measurement of sustained performance.
Second, governments seeking to make their GDPs more evenly distributed need to understand that it is not strictly an economic challenge. Rather, they need to look at their policies regarding labor force development, education, and health care, and determine the implications of those policies for their economic strategy. They also need to examine their financial regulations, capital efficiency, and overall macroeconomic stability; indirect and portfolio investments must flow smoothly, while the overall system remains disciplined, robust, and immunized against excesses, shocks, and abrupt corrections. They will have to develop export markets for the products they hope to manufacture and the innovation engines that will create the products these markets need. In sum, instigating true economic diversification and sustainable development, and thus entrenching economic resilience, requires achievement of a long and exhaustive checklist of initiatives.
If the leaders of the Gulf states understand what is involved in true diversification, they have a better chance of creating clusters of economic activity or whole industries that are capable of innovation. To be sure, the creation of innovation-based economies cannot be forced and should come as a natural phase in an economy’s transformation. But that is the key to creating long-term, sustainable growth in their economies and ensuring stability and a high standard of living for their people. In so doing, they could serve as an example to other single-resource economies around the world and become paragon states of economic resilience.
Rabih Abouchakra is a principal with Booz & Company based in Abu Dhabi. He focuses on public administration modernization, public policy, large-scale transformation, and organizational development and change management.
Mazen Ramsay Najjar is an associate with Booz & Company based in Beirut. He focuses on public policy, socioeconomic development plans, macroeconomic policy and governance frameworks, and turnaround and transformation projects.
Richard Shediac is a vice president with Booz & Company based in Abu Dhabi. He specializes in financial services and public sector projects and has led and participated in various strategy, operations improvement, and organization projects in the Middle East, Europe, and Asia.
Also contributing to this article were Booz & Company Principal Chadi N. Moujaes and Consultant Carla Khoury.