By Anil Bhoyrul
If the financial crash taught us one thing, it's that the GCC is not immune to global shocks
Life feels strange these days. A bit directionless. Not quite fear, but uncertainty. A hunch that bad news is coming, but exactly when, where and how, I don’t know.
But I know how to cope, because I have been here before — exactly three years ago. Do you remember that time? It was two weeks after the crash of Lehman Brothers, and the US economy imploded overnight. John McCain (remember him?) suspended his campaign for the US presidency, and flew to Washington to tackle the crisis. Senator Obama, as he was then, came up with the foundations of what was to be his controversial stimulus package. European leaders rushed into emergency meetings as they came to terms with the ensuing sovereign debt crisis that would dominate the next three years.
But here, in the GCC, life went on as normal. “It won’t affect us.” “Our economy is too strong.” “We have already taken measures to insulate ourselves.” In fact, even as late as December 2008, greedy landlords on the Palm were still collecting over $60,000 a year in rent for a small two bedroom apartment. It was one cheque or no cheque.
We all know what happened next. So three years on, it feels like déjà-vu. At one stage last week, the price of gold slumped by $100 in a single day. Silver saw its biggest single day fall since 1979. The FTSE100 had $117bn wiped off its value, while the International Labour Organisation has just warned that G20 countries could end up losing 40 million jobs by 2012. Even the Eurozone’s last desperate throw of the dice, a $2.6 trillion bailout, was in danger of being derailed by German courts. In the UK, the IMF is predicting just 1.1 percent growth for 2011, compared to its two percent forecast at the start of the year. Four of the G20 countries, Italy, France, South Africa and the USA are now expected to grow at less than one percent this year, while global growth is now set for just four percent in the best-case scenario.
Which leads to the obvious question — is the chaos of the West going to head East? Once again, our leaders remain positive. Speaking to Arabian Business this week, the UAE Minister of Economy Sultan Al Mansouri said: “There will be a positive economic growth for this year. My expectation is that the growth will be more than three to 3.5 percent this year.” Sheikh Ahmed is equally positive, even hinting at big orders to come for Emirates Airline at the Dubai Air Show next month. Even Nakheel appears to be back in action, announcing plans for new villas on the Palm Jumeirah.
I admire their optimism, and nobody should doubt or question the leadership of GCC leaders at this crucial time.
But ultimately, whether or not we spiral into another recession, will depend on one thing: the banks. Worryingly, UAE Central Bank data shows that provisions of UAE lenders against bad loans rose this year to $13.2bn, the highest figure since the end of 2008.
Sultan Al Mansouri told this magazine earlier in the week: “UAE banks have taken the necessary provisions to deal with these issues.” We must hope the banks are telling him the truth.
Give Wael the big prize
I’m delighted to see that Wael Ghonim has been nominated for the Nobel Peace Prize. Personally I think they should just scrap the selection committee and give Ghonim the prize right now.
If anything, the way he has conducted himself since the revolution in Egypt — shunning the celebrity lifestyle (and millions) he could have walked straight into, shows the true stature of the man.
And winning the prize would be a kick in the teeth for author Andrew Keen. I had dinner with Keen a couple of weeks ago, who told me that Ghonim would soon become irrelevant, and at best would simply be a “footnote in history.”
Of course, I respect Keen’s right to an opinion, but I have rarely disagreed more with anyone over the past 45 years. And that’s me being polite.
(Anil Bhoyrul is the Editorial Director of Arabian Business. The opinions expressed are his own.)