DIFC Economic Forum sees gloom and doom outside the GCC

Perhaps it was inevitable after the credit crunch in global markets this summer that the 2007 DIFC Economic Forum would prove a sobering event, and the normally high-spending financial community appeared to have largely baulked at the $3,000 a ticket price tag and declined the invitation to work at the weekend.

As with other recent financial conferences in Dubai the attendance by UAE nationals was also notable only by its absence. However, that was shortsighted, because some of the finest brains in the business assembled on stage in Dubai to debate the global economic outlook and to reflect on how this might impact the region.

US housing slump

Keynote speaker Professor Robert Shiller from Yale explained how the first slump in US house prices since 1933 and the ongoing credit squeeze were set to create big waves and damage spending by the $9.2 trillion US consumer in 2008.

The major controversy of the conference revolved around whether the US and emerging markets had 'decoupled' in such a way that the tail could now wag the dog.

Morgan Stanley Asia chairman Stephen Roach was scathingly dismissive noting that the Chinese consumer was worth just $1 trillion in annual spending and his Indian counterpart $650m, and that there was therefore no way that they could support the global economy with the $9.2 trillion US consumer in trouble.

From Templeton Asset Investments, the legendary investment manager Dr Mark Mobius struggled to strike a more optimistic message, and talked in general terms about how previous bear markets had turned out better than anyone might have imagined at the time.

In an afternoon panel on 'hot investment vehicles for 2008' the participants tried as hard as possible not to commit themselves. Dr Norbert Walter of Deutsche Bank and David Hale of Hale Advisers came closest to offering clear advice, agreeing on 'gold and the euro'.

Oil price to fall

Middle East capital markets received little attention from the speakers. But Stephen Roach prophesised that China and India would follow the US into an economic downturn and that as China was a major customer for oil that had clear and negative implications for markets in this region.

It was left to local DIFC chief economist Dr Nasser Saidi to inject a little balance into this debate. He cited the $1.3 trillion in investment committed in the GCC in comparison to the total of just $800m for Brazil, Russia, India and China combined.

He also pointed to the $934bn in oil surpluses from 2003-7 and the fact that the GCC economies would remain in a surplus position so long as oil was above $38 a barrel compared with above $90 today.

In short, while the DIFC Economic Forum seemed to spell out a 'very tough year ahead' for financial markets in the words of Morgan Stanley's Roach, there was at least some compensation in the conclusion that perhaps the least-worst place to be was the GCC.

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