Decoupled from reality

It was around 330 bc that Aristotle provided the first observational evidence for a spherical Earth, no doubt prompting a few red faces among those who had insisted that not only was the world flat, but that anybody wandering too close to the edge was liable to fall off.

A mere 2339 years later, and along with those that claimed the world was flat, we may now lump those who told us that our emerging economies were sufficiently decoupled from the US economy that even a severe slowdown would barely cause a ripple in the Gulf.

In the era of globalisation and the tighter intertwining of economies through trade and finance, business cycles have become more synchronised than ever - and the myth of decoupling is one that was thoroughly debunked in 2008.

China and the rest of Asia may represent the future for Gulf economic growth, but if history has taught us anything, it's that you can't forget your past. We may export more to China than ever before, but that doesn't mean we're able to do without US-Gulf trade and finance altogether.

The US spent most of the 20th century as the world's leading economic superpower, and while that era may have passed, its demise has had nasty implications for emerging markets, the Gulf included.

The collapse of commodity prices - chief among them the black gold that has funded the Gulf's wildest dreams over the last decade - and a sharp real estate downturn has prompted an alarming slump across the region's stock markets.

Consumer and business confidence has taken a hard knock too - six months ago many seemed convinced the good times would never end; now many of those same people can see no light at the end of a long, dark tunnel.

Nevertheless, while wishing people a happy New Year might seem a little incongruous given the current economic climate, we should look forward to 2009 with some measured optimism.

Gulf stock markets may not yet have hit bottom, but it is inconceivable that they can take as heavy a hit in 2009 as occurred in 2008. Even the most cautious of analysts concede that a rebound is likely before the end of the year - there are bargains to be had and attractive valuations will see the return of institutional investors to the markets, not to mention the likelihood of increased sovereign wealth fund participation.

And while it will be some time before we see $147 oil again, we are unlikely to remain at $39 for much longer either. Most analysts estimate an average of around $50 in 2009, as demand picks up on the back of the anticipated global economic recovery and OPEC supply cuts kick in.

It will be a long road to recovery for those Gulf economies winded by the downturn, but there are significantly less hurdles than exist for some other regions for which the next 12 months are likely to bring nothing but misery. Good luck in 2009, and may it prove a year to remember for all the right reasons.

Andrew White is the editor of Arabian Business English.

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READERS' COMMENTS

Boring Trash And No Dash
Posted by Aussie Ahmed, Dubai, UAE on Sunday 4 January 2009 at 13:09 UAE time

What a boring analysis of a highly compelling topic.

Rather than a staid piece of editorialising, this topic would have been much better served as a proper article - try using a few sources, get some comments from the blokes on the trading floors who are bleeding onto the floors of DFM, ADX, KSE, BSE and other regional bourses. That's what journalism is all about, after all, not what your particular take is on the situation. OP ED pieces are all well and good - but they shouldn't be dressed up as properly researched editorial.

I can think of any number of magazines, even within the UAE region, that have done a better job. I will decline to mention any names, but some of them are quite new and the journalists much less familiar with the nuances of the region, and even they have managed a more balanced, engaging discussion.

As for your lead - it's buried four pars into the story - what's with all that Aristotle stuff you've pulled off Wikipedia and somehow dressed up as a 'lead'. That ain't a lead, especially when you're writing for the web, it's historical background with spurious relevance to the topic. We don't care that you went to the best grammar school and received a classical education in Ancient Greek philosophers - we want to read about the local markets - that's what your spill on the homepage offered and that's what we expect.

I apologise if I come across all holier-than-though - but I really would love to see a bit more quality in discussion of such topics. There is precious little proper analysis in the GCC of exactly what is going on with the local markets - and this latest effort from Arabian Business falls a hell of a long way short of the mark.

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