Effects of the Crisis on Financial markets
The financial markets in the GCC countries were not spared. All the major indices that are used in these markets recorded poor performance during the period of recession. For example the composite index recorded a decline of more than 60 percent (Martin, 2009). This decline meant that the economic growth of these countries will be impacted negatively. This would then hinder these countries from achieving their set goals.
Effects of the Crisis on Economic Growth of GCC
In 2009, the actual effects of the crisis began to be felt. The global GDP decreased by about 0.5 per cent. In the GCC region, the GDP of the six member countries fell by two per cent to stand at four percent from the previous figure of six percent in 2008. The decline in economic growth was fuelled by reduced lending by the commercial banks (Mayes, 2009). This affected the ability of individuals to start small business due to lack of capital. This negative economic growth was also occasioned by reduced revenues from sale of oil due to the decrease in global oil prices. The global crisis discouraged investors from America as well as European nations from investing in the GCC countries. This in effect hindered economic growth of these countries.
Effects of Financial Crisis on Qatar
Of all the GCC countries, Qatar and Dubai were most affected as compared to other countries in this region. This was due to the fact that these two countries have largely diversified their economies. While most of the GCC countries rely on oil resource as their main source of revenue, Qatar and Dubai have diversified into other economic activities which help them to get additional income. These economic activities include tourism, real estate, infrastructure projects, entertainment as well as hospitality. Real estate and tourism have particularly affected the economies of these two countries negatively.
For the tourism industry, most of the tourists who visit these two countries are from Europe or America. With the financial crisis directly affecting America and Europe, the number of tourists declined. This was because during hard times such as during recession, the cost of living rises. People tend to cut on their spending so as to cope with the rising cost of living. Those activities that are seen as luxury are postponed so as to save on unnecessary costs. Tourism and travelling is one such cost. This implies that in times of recession, there are few tourists going for visits. As a result, those countries which rely on tourism are adversely affected. Other sectors of the economy are also affected by low tourist numbers. These sectors include entertainment, transport, hotel and hospitality among others.
Real estate industry in Qatar and Dubai was also impacted negatively by the housing bubble in the United States and the consequent recession. After the busting of the bubble, many investors became very cautious with investing in real estate (Martin, 2009)....