Gulf Cooperation Council (GCC) countries could accelerate the region’s GDP growth over the next decade from 3.8 percent to 5.4 percent, a new report has said.
This acceleration would add more than $2.5 trillion to the gross domestic product.
Titled ‘In Search of Productivity: The Next $50 Trillion in the Global Economy’, the research was launched by the World Governments Summit (WGS) in partnership with Strategy& Middle East, part of the PwC network.
New measure of GDP productivity
The report introduced a new way of measuring productivity that includes dimensions such as environmental impact, health, innovation, and the quality of institutions.
To unlock the upside of economic growth and prosperity, GCC countries can strategically improve their productivity performance by leveraging the Productivity Potential Index (PPI) to identify the weakest determinant of productivity, and then lifting that to the level of the best-in-class countries, the report suggested.
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The new method of measuring productivity introduced in this report gives countries the tools with which to identify their overall productivity potential and the potential drivers that could accelerate it. It adds inputs for social capital, natural capital, and the quality of institutions to the traditional measures of labour and human capital, physical capital, and innovation and intangible capital.
Productivity Potential Index
The new framework takes the form of a PPI. It comes with an online policy simulator that enables users to see how the 25 countries in the first sample stack up against each other across 19 criteria grouped into six categories. The estimated potential productivity that the index provides answers the question ‘what would we expect Country A’s productivity to be, given its endowments, if it used those endowments as well as the average country across the sample?’
“The potential boost to GCC economic growth from a better understanding of the determinants of productivity is impressive and, if its findings are acted upon, this could substantially improve the lives of people in the region over the next decade,” said Chadi Moujaes, partner with Strategy&, part of the PwC network. “We hope our research will help governments everywhere identify more accurately where they can make a significant difference to their productivity and economic growth performance.”
“At a time when the world is looking to become more sustainable, it is essential to have appropriate tools for measuring economic progress that take into account criteria such as the environment and biodiversity, along with a range of social capital measurements,” said Dima Sayess, partner and Ideation Center lead at Strategy&. “This new index fills an important gap.”
Benefits of the new PPI model
- The index enables countries to more easily identify both the strongest and weakest aspects of their economic performance.
- It highlights which factors can become the biggest game changers for productivity and economic growth, using benchmarks from best-performing countries.
- It provides policy makers with a practical view of how they can close gaps and leapfrog performance, with the goal of attaining the levels already reached by economies with the highest productivity.
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