Financial Credit and Expansion of the Non-Hydrocarbon Sector in Gulf Cooperation Council Countries

The Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates), while heavily reliant on hydrocarbon export incomes, have also witnessed a gradual expansion of their non-hydrocarbon sector, as well as an increase in the diffusion of financial services. Research into the impact of the financial sector credit on these groups of countries' non-hydrocarbon sectors is deficient. This study minimizes this deficiency by investigating if credit provided by the banks promoted the non-hydrocarbon (services, manufacturing and agriculture) sectoral expansion in the Gulf Cooperation Council Countries. The findings reveal robust evidence of a statistically significant and positive effect of credit provided by banks on the expansion of agricultural and services sectors but not the manufacturing sector. The findings also confirm that labour, investment, technology, and international trade are other strong predictors of these sectors' expansion.