‘Gulf will help mitigate global economic turmoil’

February 24th, 2008 - 7:58 pm ICT by admin  

By Aroonim Bhuyan
Dubai, Feb 24 (IANS) The current economic boom in the Gulf will help mitigate the turmoil in the world economy, according to leaders of global banking and financial industry. “At a time when the fabric in our (financial) institutions in the North is under stress, the fabric in the (Gulf) region can provide resilience to the global market,” managing director of the Institute of International Finance (IIF) Charles Dallara told reporters here after the conclusion of the 11th Annual Meeting of the Middle Eastern and North African Bank chief executives Sunday.

The meeting was organised by the IIF, a global association of financial services institutions with more than 370 members in over 60 countries, in partnership with the Dubai International Financial Centre (DIFC).

“The candid exchange of views in our meeting underscores the theme of cross-border partnership between financial institutions that we can expect to accelerate in coming years and that can strengthen the modernization and development of finance in the Middle East,” he said.

Chief executive of DIFC Nasser Al Shaali said: “Recently, MENA (Middle East and North Africa) has achieved above trend economic growth rates sustained by an average GDP growth of 6.2 percent over 2004-2007 versus 3.7 percent in 1998-2002.

“In addition, growth resurgence has been investment led with increased infrastructure investment leading to an increase in absorptive capacity and an increase in productivity growth.”

IIF’s special advisor and director for Africa and the Middle East George Abed said that with the region’s economies rapidly integrating with the global economy, the imbalances in the global economy would be smoothened out.

“Since 2000, this region has been increasingly integrating with the global economy. This region provides 40 percent of the global oil supplies and has 40 percent of the world’s oil and gas reserves,” he said.

“This region is assisting in balancing the global imbalances and the integration of the region in the global financial market will be taking many folds.”

Earlier, addressing the meeting, IIF chairman Josef Ackerman said that the Gulf Cooperation Council (GCC) region was in the midst of a boom, underpinned by sustained high oil prices, with the economic drivers going beyond oil as private confidence and investment were now at an all time high.

“Even if the US were to slip into recession, and oil prices were to dip, we believe the impact would be greatly mitigated by the significant number of major infrastructure projects that are already under way or are being pursued throughout the GCC,” he said.

The GCC comprises the United Arab Emirates (UAE), Saudi Arabia, Kuwait, Bahrain, Qatar and Oman.

“This will provide momentum for robust development in a number of sectors, including energy and petrochemicals, real estate, trade and finance, and tourism for several years to come,” the IIF chairman said. He, however, said that the GCC region still had some structural issues that needed to be resolved.

“For example, the education systems require further upgrading and re-orientation to the needs of the market if unemployment among nationals - particularly graduates - is to be reduced. Corporate governance standards are also not as robust as they should be.”

DIFC governor Oman Bin Sulaiman said that the region has proved its resilience to uncertainty and volatility in the credit and financial markets of the US and Europe.

“We have been relatively unaffected by the recent crisis in America’s sub-prime mortgage market, which has affected investor confidence and resulted in a global downturn of share prices and the threat of inducing recession in the G7 with transmission effects to emerging markets,” he said.

“The region’s resilience and positive prospects built on sound macroeconomic conditions has encouraged institutional investors, both local and international, to turn to our region for greater liquidity and portfolio diversification.”

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