The effects of COVID-19 pandemic on the economies of GCC countries due to low oil prices: A case study of KSA, UAE, and Qatar

This thesis investigates the impacts of low oil prices due to COVID-19 on the economic growth of GCC oil exporting countries, specifically KSA, UAE, and Qatar, over the period of 2000-2021 using data found on the IMF and Statista databases. The literature related to this topic mostly suggests existence of correlation between oil prices and GDP which is discussed in depth in the theoretical part of the paper. Accordingly, the following hypothesis was constructed: a decrease in oil prices negatively affects the growth rate of KSA, UAE, and Qatar. This hypothesis was tested by means of a regression model following an equation by Mork & Olson (1994), in which empirical estimates were obtained. An ADF unit root test concluded that the variables were all stationary, satisfying the stationarity condition for the Granger-causality test to be performed. However, the results of this test failed to support my hypothesis, as it showed no correlation between oil price changes and economic growth, but rather other variables. As for COVID’s impact on the GDP growth rate, the regression models confirmed that COVID negatively impacted the growth rate in all three countries, at a significance level of 10%. Whereas Mork and Olson’s results showed a negative relationship between oil prices and growth rate, my regression results showed a positive relationship between the two variables. A possible explanation for such results could be that the countries I am researching are oil-exporting countries, whereas they mostly studied oil-importing countries; hence the opposite result.