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World Bank: Gulf Spending More Effective in Recessions
The study examined the extent to which government spending in the Gulf countries contributes to stimulating non-oil economic growth in the short term. It found that such spending has a limited fiscal multiplier, ranging between 0.1 and 0.4. This means that every additional dollar of government expenditure adds between 10 and 40 cents to the non-oil gross domestic product (GDP). The study also revealed that the impact of government spending is more effective during periods of recession, approaching the higher multiplier (0.4), as it compensates for weak private demand. Conversely, its effect diminishes during periods of economic expansion. Furthermore, the results indicated that government spending policies should be characterized by caution and well-timed interventions, directing resources toward sectors that generate the greatest economic impact, and avoiding excessive spending during boom periods. This approach aims to enhance stability and maximize the benefits of government financial resources.
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