Economic Diversification and Social Progress in the GCC Countries: A Study on the Transition from Oil-Dependency to Knowledge-Based Economies

TL;DR

This study assesses how GCC countries are progressing in transitioning from oil dependence to knowledge-based economies by analyzing social progress indicators and forecasting future trends using machine learning.

Contribution

It introduces a novel application of XGBoost and ARIMA models to forecast social progress in GCC countries based on comprehensive data analysis.

Findings

GCC countries show improvements in education, healthcare, and women's rights.

Challenges remain in personal rights and social inclusivity.

Steady SPI score improvements are forecasted through 2027 despite economic disruptions.

Abstract

The Gulf Cooperation Council countries -- Oman, Bahrain, Kuwait, UAE, Qatar, and Saudi Arabia -- holds strategic significance due to its large oil reserves. However, these nations face considerable challenges in shifting from oil-dependent economies to more diversified, knowledge-based systems. This study examines the progress of Gulf Cooperation Council (GCC) countries in achieving economic diversification and social development, focusing on the Social Progress Index (SPI), which provides a broader measure of societal well-being beyond just economic growth. Using data from the World Bank, covering 2010 to 2023, the study employs the XGBoost machine learning model to forecast SPI values for the period of 2024 to 2026. Key components of the methodology include data preprocessing, feature selection, and the simulation of independent variables through ARIMA modeling. The results highlight significant improvements in education, healthcare, and women's rights, contributing to enhanced SPI performance across the GCC countries. However, notable challenges persist in areas like personal rights and inclusivity. The study further indicates that despite economic setbacks caused by global disruptions, including the COVID-19 pandemic and oil price volatility, GCC nations are expected to see steady improvements in their SPI scores through 2027. These findings underscore the critical importance of economic diversification, investment in human capital, and ongoing social reforms to reduce dependence on hydrocarbons and build knowledge-driven economies. This research offers valuable insights for policymakers aiming to strengthen both social and economic resilience in the region while advancing long-term sustainable development goals.