The long and convoluted move towards monetary union in the Gulf region suffered a major setback this week when the UAE announced it would not participate. Research from Standard Chartered argues the reason is because the UAE, the second largest economy in the area, had grown increasingly concerned by what it saw as Saudi Arabian dominance of the project.
“The UAE’s decision poses serious setbacks for the progress of the monetary union. Not only is the UAE the second largest economy in the Gulf Co-operation Council (GCC), but it is also the second country to withdraw from the monetary union (the first was Oman), leaving Saudi Arabia, Kuwait, Qatar and Bahrain. With the UAE and Oman out of the running, Saudi Arabia dominates the picture even further. Saudi Arabia will make up around 67% of the GDP in the common currency area. Market reaction has been muted, since markets were never convinced that the introduction of the common currency was imminent,” the bank writes.