WILL GULD PEGS TO THE DOLLAR ENDURE?

Against the backdrop of a price war between the world’s three biggest crude oil producers (United States, Saudi Arabia and Russia), the COVID-19 crisis has led to an unprecedented slump in global demand for crude oil. Reeling from these two shocks , crude oil prices have collapsed, endangering the growth of countries whose development is based on the exploitation of oil and gas resources, notably the countries of the Gulf Cooperation Council (GCC) . The fall in crude oil prices and continuing appreciation of the US dollar since the start of the year have brought downward pressure to bear on currencies indexed to the US dollar. We consider here more particularly five countries of the Gulf Cooperation Council (Saudi Arabia, United Arab Emirates, Qatar, Bahrain and Oman) whose currencies are pegged to the US dollar. This note the refore analyses the vulnerability of these economies to the currency crisis in order to assess the sustainability of the fixed parity currency regime adopted for each currency. What we go on to show is that , though all dependent on crude oil, the GCC economi e s present extremely diverse profiles. Although the economic fundamentals of Saudi Arabia, Qatar and the United Arab Emirates have deteriorated significantly during this oil crisis, they remain strong. In contrast, Oman and Bahrain are already experiencing financial and economic difficulties. Oman’s situation is all the more perilous on account of its geopolitical isolation at regional level.