Too
many countries have levels of debt they will not be able to finance, which
could cause further economic turmoil in 2011, Gulf economic expert Eckart
Woertz has said.
Speaking
to Arabian Business, Woertz, who is a visiting Fellow at Princeton university
in America, said GCC economies would not be insulated from another downturn on
international markets.
He
said: “Debt levels are still at historic and unsustainable peaks compared to
GDPs. There was only a certain shift from private to public sector debt
issuance and the latter has faced increasing problems in 2010, be it in
California or Greece.
“People
who uncritically hail the growth potential of China and other emerging markets
may think twice: their growth model has relied on exports and deficit spending
in the US and other OECD countries – if the latter crumbles, they will face
problems as well.”
Woertz
added that should the global economic recovery witnessed in 2010 continue, oil
prices would be buoyed by improved demand, which would benefit the Gulf. He
issued caution, however, particularly for property owners in Dubai.
He
said: “The picture might not be as rosy as some predict and the overextended
real estate sector in some GCC countries like the UAE will remain in the
doldrums. But even if oil prices may face pressure from the demand side,
drastic corrections below $50-60 are unlikely due to supply constraints.
“The
Gulf region will be also in a relatively privileged position in global
comparison because of substantial assets and manageable public debt levels,” he
added.
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