MANAMA: The economic crisis emphasized the need for further diversification in GCC (Gulf Cooperation Council) economies and highlighted the vulnerabilities in the financial system, driven primarily by high rates of leverage, according to an expert.
“To benefit from the global recovery and build a foundation for sustainable growth, GCC policymakers will need to consider a number of key reforms to reshape their fiscal and economic management practices and governance,” said Nabih Maroun, a partner at Booz & Company.
“The GCC escaped largely unscathed from the global financial crisis, but recognized vulnerabilities in the financial sector. As global economies recover, GCC policymakers can take proactive steps now to speed recovery, and shield their economies from future turbulence,” he added.
“While largely shielded from the effects of the global economic crisis, GCC countries were not entirely immune. As the global economy begins to recover from the financial turmoil triggered by the collapse of Lehman Brothers in September 2008, GCC policymakers can take their own steps to accelerate the region’s recovery-and protect it from future crises,” according to a new study by Booz & Company.
“The crisis emphasized the need for further diversification in GCC economies and highlighted the vulnerabilities in the financial system, driven primarily by high rates of leverage.”
“The region seemed somewhat sheltered from the crisis, but by November 2008, it was clear that it would not ride out the storm entirely,” commented Richard Shediac, a partner at Booz & Company. The decline in GCC stock markets began to accelerate; oil prices dropped from $110 per barrel at the end of the third quarter to approximately $40 per barrel; and financing began to dry up.
“Consequently, some states, including Dubai, Kuwait, and Bahrain were significantly affected by the crisis, as were certain non-oil sectors including financial services, real estate and tourism.”