By Ed Attwood
Emirates NBD executive predicts long-term US growth limited to “no more than 2 percent”
The days of the fast-growing traditional economies are over, and clients need to look at emerging markets as drivers of future growth, a leading UAE banker announced on Monday.
“What we’re highlighting to our clients is the need to keep a balance of assets as we enter an environment where the emerging markets, rather than the developed world, will provide much of the growth for the future,” said Gary Dugan, chief investment officer of private banking at Emirates NBD, at a roundtable held in Dubai.
“The years of the really strong growth rate in the economy are probably behind us. Even this year, we are predicting a 10 percent rise in China but rises of around 1-2 percent in most of the developed markets.”
Dugan indicated that the US is coming off a 20-30 year period where it was growing at between 3-4 percent of GDP a year, but said that the bank’s view, long term, was that the country would achieve no more than 2 percent GDP growth going forward.
“The days when our clients would have lots of US or European equities are long gone, and the wake-up call is that you should be in the emerging world; it’s less volatile that it was in the past and a good balance of bonds and equities will serve the client well,” the Emirates NBD executive added.
One major factor behind this shift is ageing populations, Dugan stated. Workers that have retired provide a significant drag on GDP growth – as evidenced by the flat growth in Japan over the last decade – and this is a factor that will become more of an issue in the near future in the traditional economies.
“In the emerging world, there are lots of people making themselves available to work, and that’s going to provide a significant stimulus to growth,” Dugan observed.
Its right time investors from Middle East turn their focus from China to India. India's economy has shown its strength during the recent crisis and has the best structural framework compared to China. India is expected to surpass Janpan in terms of GDP by 2012 and provides ample investment opportunities in sectors such as infrastrcture, power, logistics. Any investor intending to have a balanced portfolio should have atleast 25% of their holding in India without any doubts.