Middle East set for increased growth prospects in 2011 (page 1 of 2)

According to Gary Dugan, chief investment officer, private banking, Emirates NBD, 2011 will be characterised by "good growth but ongoing challenges" - and this short prognosis hits the nerve of what the GCC region can expect in the year ahead. Meanwhile, decoupling will remain the hot topic in 2011.

The core European countries Germany, France and the Netherlands are expected to post stronger growth while the 'Club Med', meaning Spain, Greece, and Portugal, will continue to struggle with record high debt. "Global growth is strong enough to support a good rally in risk markets such as equities", says Dugan. "However ongoing problems in Europe and missile testing in Korea are all restraining the rally. We believe that the markets will eventually overcome the problems. However, the structural challenges of indebted countries in Europe, the weakness of the financial sector, and the malaise of the US housing market remain challenges to long term returns."

For Dr Nasser Saïdi, chief economist of the DIFC Authority and head of external relations at the financial centre, the change of roles is too visible: "Paradoxically the countries (primarily US, UK) portrayed as the great beneficiaries of globalisation have been the main losers, while (at least so far) the largest relative gains (economically and politically) have been enjoyed by China and other emerging markets which were expected to be the targets of the globalisation."

Decoupling seen globally

According to Dr Saïdi, decoupling is seen not only in Europe, but globally: "In 1999, the US represented 46% of the value of world equity market capitalisation, whereas emerging market economies represented a mere 8%. In 2010, the US represents 31% of global market capitalisation, pretty much the same share as emerging economies, which stands at 30% (according to S&P)", he said in December. Arnaud de Bresson, managing director, of the Paris-EUROPLACE initiative to promote France's capital as a financial centre told AMEinfo.com that despite the ongoing Euro-crisis, France did not lose its credibility among global investors, and on top of that, the French regulator AMF paved way for Paris to become the second Islamic Finance-hub in Europe after London. "With 30% of the world's government bonds outstanding of $2.34 trillion, the Fifth Republic is still globally number two after the United States", Bresson said. Standard and Poor's Ratings Services affirmed France's AAA-Rating, the highest possible investment grade level, during the same month.

For the GCC, Europe and East Asia are equally important as trade partners and likewise as sources for travel and tourism. But emerging markets increasingly outpace Western developed countries. "The D10 (BRIC, Indonesia, Turkey, Mexico, South Korea, South Africa and Saudi Arabia), now represent some 35% of world output and have about 25% of world exports", Dr. Saïdi explains. As China already took over as the largest consumer of power in 2010, the GCC is eager to strengthen ties with Beijing. China's economy needs oil, gas and petrochemical products from the Gulf Arab region. The six member states of the GCC aim to lure investments as a result.

Diversification is key

Growth prospects for the member states of the GCC have been all revised upwards for 2011.