Due to a lower-for-longer oil price environment, the average oil revenue in the six GCC countries declined by 47 percent of GDP between 2013 and 2016, while three of these countries had fiscal deficits exceeding 15 percent of GDP in 2016. Against the backdrop of the large multiyear fiscal consolidation programs GCC countries have embarked on, and the traditionally significant link in these economies between government spending and growth, it is important to explain the concept, construction, and significance of fiscal multipliers in formulating economic policy. The presentation would highlight that—and discuss why—fiscal multipliers have fallen in recent years, suggesting fiscal consolidation efforts could be less costly than previously thought.
