Week in review: No quick economic turnaround

Standard Chartered estimated that there was a liquidity shortfall of Dhs110bn in the UAE and that a direct injection of 'sticky' liquidity was needed.

On a positive note, Standard Chartered believes inflation will fall to around 3% in 2009 and that like other economies in the Middle East, Africa and Asia, it will start to see an upturn sooner than countries such as the UK and US.

'As painful as a correction might be when you are going through it, it is positive for the UAE economy....because we're going to see inflation becoming much lower,' said Marios Maratheftis, regional head of research, Mena for Standard Chartered.

NBK warned that while the government's moves to stabilise the economy would help re-establish confidence, there was 'continued weakness' and 'no guarantee' of a 'meaningful recovery' this year.

However, it did point out that the mere fact that it would still have positive growth was 'by no means a disaster' when compared with economies in other parts of the world.

And Kuwait itself is not without its problems. Following the news that its Parliament was being dissolved, Moody's Investors Service said the country's soverign ratings faced possible downgrade.

"Moody's stresses that it does not have normative views on types of government. We simply seek to assess institutional capacity as part of our analysis of sovereign creditworthiness. In the case of Kuwait, we discern a deteriorating trend in government effectiveness, exemplified by the repeated changes of government and parliament.

'It is the accumulation of such disruptive political events rather than this event in particular which is concerning", said Tristan Cooper, Vice President and Senior Analyst in Moody's Sovereign Risk Unit.

While the general economic outlook has been one of doom and gloom, some commentators say they are seeing signs of change.

Speaking at the biggest travel show in the world, ITB Berlin, John Felix, Snr VP, Emirates Holidays said there is a mood of optimism, with small signs of a rebound in the travel industry. 'It's probably the best time to go somewhere because there are a lot of generous offers,' he told AME Info.

However, there was no commitment to when that rebound will happen and certainly few commentators are prepared at the moment to say when they think markets will begin to look more positive.

In the Dubai real estate market, Shayne Nelson, regional CEO Mena, at Standard Chartered, said it was tough to call when property would reach its bottom and how long it would take to get back to previous highs.

He pointed to Shanghai, which took about three years and Singapore, which took a decade as examples of how difficult it is to predict a turnaround time.

Ian Ohan, Regional Director and head of investment transactions at Jones Lang Lasalle, expects developers to face further difficulties this year, particularly in off-plan projects where there is a high risk of defaulted payments.

'We believe that 2009 will be a year of correction, 2010 will be the year of stabilisation and that 2011 will be the year of recovery,' he said.