Jun 26 2012
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How will the Euro crisis affect the GCC?
The countries within the bloc may escape the direct negative effects of the problems in Europe but the indirect impact will be felt, say economists.
"I feel the impact of the Euro crisis will be moderate but not severe for UAE in terms of incremental pain. A disorderly development (like Greece getting out of Euro, or EU collapsing) will have negative feedback loop for everyone including the GCC. Nobody can be immune to such a black swan event," R. Raghu, Senior Vice-President-Research at Kuwait Financial Centre ( Markaz ) told Emirates 24|7.
Giyas Gokkent, Group Chief Economist at National Bank of Abu Dhabi (NBAD), believes that "there are multiple linkages."
According to a recent Standard Chartered bank the regions strong economic base should cushion the negative impact. The bank estimates the GCC's average current account surplus is 20 per cent of GDP. In 2011, the GCC states had combined foreign assets of $1.7 trillion, and hydrocarbon revenues of $500 billion. "This should help the governments promote counter-cyclical policies and alleviate the external shock from Europe," bank experts say.
According to recent media reports, the global markets are taking on shades of the 2008 crisis, with the potential for a collapse in investor confidence. The debt crisis is putting pressure on corporate earnings globally with companies cutting forecasts and signalling profits will fall at more companies this year.
© Emirates 24|7 2012
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