Font Size

- Aa +

Sun 28 Jan 2007 12:00 AM

Font Size

- Aa +

Gloom over boom for Mid East in 2007

The Doha trade talks will “collapse” and the region is “slowly destabilising”, a senior economist has warned.

The Doha trade talks will “collapse”, the region is “slowly destabilising”, the US has a “35% chance of entering into military conflict with Iran” and Turkey will not become a member of the European Union (EU) for “another decade”, a senior economist at the World in 2007 forum has gloomily warned.

Robin Bew, editorial director and chief economist for the Economist Intelligence Unit (EIU) told forum delegates that 2007 would be a “stunning year” for business in the Middle East and that there would be “no slowdown” in growth over the next year but that regional conflicts and disputes, further disruption during rounds of ongoing trade talks and the EU’s long-term refusal to accept a predominantly Muslim country into its club of nations could disrupt the next 12 months.

“Turkey will not be accepted into the EU for another decade, in fact the EU is currently moving further away, rather than closer, from accepting it. The political psychology of the EU is not in favour of Turkey joining,” Bew said.

“The EU is ring fencing enlargement and concentrating on other issues but if it does that popular support in Turkey could see it turn its back on the EU in favour of other allies and the situation could get very depressing,” he added.

Caroline Bain, country risk services manager at the EIU, said that the UAE would see 5.5% growth in 2007 with high liquidity and buoyant investment demand in the construction and property sector in particular driving the Emirates forward. However she added that geopolitical issues in Iraq, Iran, Syria and Palestine, the inflationary impact of high liquidity and a slump in oil prices to around US$58 per barrel could dampen growth patterns.

“Government spending and private investment remains strong but foreign investors still face significant barriers and these need to be lifted if the country is to progress even further,” she said.

“The main challenges lie in managing the inflationary impact of high liquidity especially in real estate and managing the growth in consumer borrowing.

“Further regulation of asset markets is needed to encourage long-term investment and improve transparency. The creation of an independent and effective judiciary needs to happen as well as facing up to labour market issues. "If the cost of living continues to rise it could damage Dubai’s momentum, especially when hiring staff to fuel the service sector,” she added.

On a positive note Bain suggested that Dubai and the Emirates were moving progressively forwards by using vast amounts of petrodollars for diversification purposes such as education, foreign investment and infrastructure projects.

The outlook on oil for 2007 and 2008 remains strong, according to Bain, with growth stabilising at 2% fuelled mainly by the growth of emerging markets such as China, India, Russia, Eastern Europe and the Middle East, however this figure remained “unpredictable”.

For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.