HSBC hosts Annual Economist Roadshow Economic burden of political unrest high: Williams

KUWAIT CITY, Nov 28: The HSBC hosted the Sixth Annual Economist Roadshow at the Salwa Al-Sabah Theater and Hall, Wednesday, Nov 28. Guest speakers David Bloom, Global Head Foreign Exchange Strategy and Simon Williams, Chief Economist, HSBC Middle East region each shared their views on the themes shaping global economics with thought-provoking presentations. David Bloom offered his views on trends in the foreign exchange market, which, he said, has moved on from the years of the carry trade, when the foreign exchange market offered a clearer framework for understanding and trading currencies, to a new and far less predictable era. Bloom said higher shorter rates meant a stronger currency; the bond markets higher short rates were ambiguous for shape of the yield curve; equities depended on where one was in the economic cycle, foreign exchange was beautiful; it was clear and transparent. According to Simon Williams, the political turmoil set the Middle East apart from the fast growing emerging markets throughout 2011 and for the much of 2012.

“But a combination of high oil prices, fiscal stimulus and, finally, political stabilization is seeing regional growth regain speed at a time when the rest of the world seems to be slowing. “The gains are significant but the near-term risks are high, though longer-term it may be productivity, not politics, which is the real threat to performance. On Kuwait, Williams said the country will continue to record the highest budget and current account surplus in the region, but will need to advance on some of the larger projects under the National Development Plan to support onshore investment and to build a sustainable and diversified economy.
He went on to say for all its problems, growth in the Middle East has held up well and the region is actually gaining speed as others lose steam.

He added, in Tunisia, Libya and Egypt, real political power is being transferred and there are some bright spots in the economy with the potential for a broader recovery in growth becoming clear. But the economic burden of political unrest is high and foreign support is imperative if economic adjustment is to be orderly with high levels of wealth supporting gains in current and capital spending. There are other non-oil producers under pressure, for the oil exporters, the near-term outlook is very strong. The region has never earned more from its oil exports with rising levels of wealth. Saudi Arabia’s foreign assets now equate to more than 120 percent of the GDP supporting gains in current and capital spending that is allowing the oil states to shrug off weakness elsewhere.

Even Dubai is finding its feet again but politics is the most immediate worry but longer term, the whole oil-driven growth story is in question. Though the potential for private sector growth is clear, so are the obstacles. Education offers insight on the challenges facing the private sector where the efficacy of education is not just about spending and its capacity to drive innovation appears limited, he said.

The conclusions he said, is picking up the pieces - the Middle East is an overlooked near term out performer:


* Political stabilization offers scope for economic recovery and normalization
* Record oil receipts and rising spending insulate the Gulf against a weak global environment
Productivity, not politics, is the key long term risk
* Economic failure is the primary threat to political transition in the post-revolutionary states
* Oil-funded, public sector led growth model is limited in scope and finite in duration
Simon Vaughan Johnson, CEO of HSBC in Kuwait said, “This annual event in Kuwait is highly appreciated by our customers and business partners. “In a constantly changing economic environment the analysis and insights that the economists bring give customers and understanding of the impact it might have on their businesses and lives. “The economists are valued for their international perspective, and their ability to provoke discussions as well as the development of new ideas,” he added.


By: Paul Francis X. Fernandes

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