Gulf Finance House holds client seminar on current economic landscape

The Investor Seminar, held in Dubai, was aimed at providing GFH clients an understanding of the latest global financial developments and the implications for the GCC economies. The event was held as part of the Bank's endeavours to provide clients an opportunity to gain insights on topical issues and to have their questions and concerns addressed by reputable experts.

Speakers at the seminar featured Mr. Roger Bootle, Managing Director of London-based economic research firm, Capital Economics, and Dr Ala'a Al-Yousuf, Chief Economist at GFH.

Speaking on the global response to the financial crisis and prospects for the global economy, Mr. Bootle said the US, UK and Eurozone government bailouts, currently amounting to US$595 billion, are not big enough to prop up the banking system.

"They will need to inject perhaps more than $1 trillion. And they will do it. There will not be a financial collapse,"

he said.

Caution in bank lending will contribute to weaker GDP growth; deflation is now the greater threat; and the economies of the industrialised world are expected to remain weak for 4-5 years, said Mr. Bootle.

Dr Al-Yousuf, who focused on the implications for the GCC, said the story unfolding was of two halves --- the balance sheets of the GCC governments are very strong, in contrast to those of the G7.

The region's private sector, on the other hand, may struggle due to the tighter credit conditions and exit of foreign partners.

"The financial strength of the GCC governments, however, and continued government spending will provide comfort to the private sector," said Dr Al-Yousuf.

As a result, the region's economic growth momentum in 2009 will match emerging market peers and will, by far, outperform the G7.

A possible correction in real estate prices, particularly in Dubai, remains a concern. The property sector and the banks with exposure to it are more vulnerable now to higher market and credit risk, said Dr Al-Yousuf.

However, measures taken by the Central Bank of the UAE should mitigate these credit risks and the expected fiscal stimulus should support the property sector in Dubai.

"Also, the strength of the balance sheet of the government of Abu Dhabi should support confidence in the economy of the UAE and of Dubai, " said Dr Al-Yousuf

This is also an example of how Dubai and other emirates of the UAE stand to benefit from their union and the inclusion of a strong member such as Abu Dhabi, he added.