Gulf unemployment to rise 'for 2-3 years' - Merrill Lynch

JOBS FORECAST: Merrill Lynch believes unemployment in the Gulf will continue to rise for years. (Getty Images)

Unemployment will keep rising in the Gulf for the next two to three years, and Dubai property prices are likely to fall further, the chief investment officer of Merrill Lynch has said.

“I think that a lot of people have maybe thought that they could get away with it, that it was going to be different here because the banks didn’t have the exposures of the bad banks of America and Europe,” Gary Dugan said.

But a lot of the region’s growth, much like in other emerging economies, has been a direct consequence of a ten-year, credit-fuelled consumer boom in the US.

The real estate market, at the centre of Dubai’s efforts to diversify its economy away from oil, will keep falling this year and estate agents arguing that prices will be resilient because they are lower than in other major cities are wrong, Dugan said.

“People say: ‘Prices here are not high because they’re still lower than they are in London and Hong Kong.’ Well I can imagine that over the next two years that property prices in London and Hong Kong could fall by 40 or 50 percent, and then where would Dubai be?”

A recovery will take years rather than months, he added.

“We’re talking about two or maybe three years of rising unemployment, which is a complete contrast of course with the success of this nation over the last ten years.”

A sharp drop in Gulf states’ oil revenue will have a “very significant” impact on most businesses in the region and companies will need to plan for years of slow growth or even falling revenue

“The strong message is to really tighten belts and prepare for the worst, because then you’ll be in a strong position to take advantage of the opportunities when they come along,” Dugan said.

“People are moving in the right direction but not quickly enough.”

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READERS' COMMENTS

Government Policy Changes can eliminate this 'predicted' downtrend
Posted by DG, Dubai, UAE on Wednesday 4 February 2009 at 10:28 UAE time


The stimulus that the GCC governments can provide to open residence, tourism and business formation remain extremely powerful tools to counter any such trends in a manner that many democratic nations simply cannot do.
What remains to be seen is how quickly and how much is done to keep and increase the optimism of its expatriate workers and residents alive, as these are the keys to the growth, when mineral wealth alone cannot deliver predictably.

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