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| RENEWED TURBULENCE CASTS DOUBT |
| 8/24/2010 |
Riyadh, July, 2010 - NCB Capital, Saudi Arabia's largest investment bank, believes that the strength of the ongoing global economic recovery is in renewed doubt following the growing intensity of the sovereign debt crisis in Europe and that, for the GCC, the crisis injects another dose of uncertainty following a fairly lackluster recovery to date.
Writing in the June edition of NCB Capital's GCC economic monthly bulletin, Dr Jarmo Kotilaine, the investment bank's chief economist nevertheless sees that region remains resilient and well positioned even for a protracted downturn. He expects growth in Saudi Arabia to remain strongly positive even under very pessimistic assumptions.
He says, "The GCC is far from immune from the global economic turbulence. For one thing, the Euro area remains one of the Gulf region's leading international trade partners. Nevertheless, GCC debt levels remain internationally low. Further, higher oil prices have left regional governments flush with large reserves which they can effectively utilize in supporting aggregate demand."
The main points in the bulletin are:
- The relapse in the global economy underscores the excessive reliance on anti-cyclical measures to address a structural crisis.
- The Euro-zone risks repeating the Japanese scenario unless timely efforts are undertaken to revive the structural drivers of growth.
- The GCC region remains vulnerable in the face of the troubles in the West.
- Nonetheless, the region remains resilient and well positioned even for a protracted downturn. The Saudi economy is well positioned to weather even a major storm.
In conclusion, Dr Kotilaine says, "As challenging as the global economic situation remains, economic divergence between the West and the emerging markets is likely to persist and potentially increase as the most acute period of risk aversion subsides. The GCC will be a beneficiary of this process."
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