Gulf Economic Update - Seizing the Opportunity for a Sustainable Recovery

This issue of the Gulf Economic Update includes a special section focused on the GCC public sector wage bill. This is placed in the context of the existing social contract whereby in addition to well-paid, public sector jobs, GCC governments have provided free health care, education, social security benefits, and subsidized housing and utilities to their citizens in return for their acceptance of the status quo. This model worked well while oil prices were high and local populations limited. However, as oil prices slumped, populations grew rapidly, and the wage bill has become both an important contributor to fiscal deficits and also a drag on potential growth of the private sector. The special topic section highlights the need to rein in civil service growth and salary inflation to put the wage bill on a sustainable footing within a new economic model based on private sector growth and development. We hope that this section will provide an impetus to GCC countries to start an action-oriented dialogue to address this pressing concern.