IANS

Dubai, May 23: When after a short recession in the US at the beginning of the decade the price of oil began its upward climb, few could have predicted just how far it would go.

In 2008, a barrel was fetching just short of $150. Average prices for 2007 were not far short in real terms of the all-time high during the Pennsylvanian oil boom of the 1860s, or the period after the Iranian revolution of 1979.

For the six states of the Gulf Cooperation Council (GCC), almost all of whom are major energy exporters, the boom has transformed their world.

Saudi Arabia, the United Arab Emirates, and Qatar have been propelled from being energy exporters to being major financial and political players beyond the Gulf. Kuwait, Bahrain and Oman have become financial, cultural and tourism centres between Europe and Asia.

The six states averaged, between 2005 and 2008, a GDP growth of 6 percent per year, engendering an anything-is-possible attitude, as in contrast to previous oil booms, this one was accompanied by a willingness to change the rules and invest at home, rather than spend the wealth abroad.

By 2008, however, financial storm clouds that had formed elsewhere were also appearing over the Gulf. Talk turned to prophesies of property market doom, and the question if and how the GCC could avoid capitalist contagion.

It couldn't. In figures published by the International Monetary Fund (IMF) May 10, GDP growth estimates for the six states have been slashed to just 1.3 percent in 2009. After the bloc boasted budget surpluses of hundreds of billions of dollars in 2008, it now expects figures to slide into the red for 2009.

Stock markets and property indices have fallen sharply, wiping inestimable sums out of private wealth. Credit flows from outside have shrunk by more than $50 billion since 2008, putting jobs and infrastructure at risk.

Things could yet get worse. Dammam, Saudi Arabia-based economist Ali Aissaoui thinks that unemployment - previously a non-issue in the labour importing Gulf, "is expected to move up the region's socio-economic policy agenda".

But the bad news is unevenly distributed. While it is true that home prices in Dubai's runaway market fell by some 40 percent in the first quarter of 2009, values elsewhere - such as in neighbouring Abu Dhabi - are holding up. Government spending in Saudi Arabia, the largest economy in the region, is plugging the gap left by sagging private demand.

And Qatar, which exports energy mainly in the form of gas sold in long-term contracts, is still expecting double-digit GDP growth through 2010. Partly as a result, it is enjoying a new-found clout on the world diplomatic stage.

But overall, the GCC is now in a new reality. Irrational exuberance is just a textbook term, no longer a reality.

John Sfakianakis, one of the region's most prominent economic analysts, told DPA that the era of unrealistic property punts and infrastructure projects was now over, as once-abundant private credit has dried up.

"The 'Mine is Bigger' syndrome is over. It was fed by bank lending but now, the taps have been closed," he said.

That syndrome is visible across the region, from enormous airports - which could yet become white elephants - to a series of cancelled or officially "on-hold" skyscraper projects in Dubai, Doha, Kuwait and Jeddah.

What, then, of real utility that has come out of the boom time, when money can evaporate just as fast as it arrived?

There are examples of products of the boom which are either forward looking, or will have implications for decades to come.

In Abu Dhabi, a world-leading institute for the study of alternative energies has been founded, and is pressing ahead with the world's first zero-carbon city.

In Saudi Arabia, Qatar, Kuwait and Dubai, sustainable public transport instead of the once-ubiquitous SUV has been embraced, benefiting both citizens, businesses, and the environment.

The boom has also seen a significant convergence of wealth and religion, in the shape of an Islamic finance industry that is on the verge of becoming mainstream, and a Bahrain-based regulator has begun laying the foundations of a unified system for a Sharia-based financial system.

The GCC is now a major node on the world's economic map, and not least because it is a port in a storm for producers of luxury goods in these times of recession.

But perhaps the greatest legacy has been the benefits of an open and - somewhat - transparent economy. In its half-yearly report on the region, the IMF praised the oil-exporting states for their "prudent financial and economic management" - an accolade that is in these days, globally speaking, in short supply.