BASEL, 12 March 2007 — Global financial markets are not out of uncertainty yet after the upheavals of the last two weeks and central banks need to monitor the situation carefully, Saudi Arabia’s central bank governor said yesterday.
Speaking to Reuters on the sidelines of the central bank governors’ meeting in Basel, Hamad Al-Sayari, governor of the Saudi Arabia Monetary Authority, also said the global economy is in better shape than people had thought.
“The markets adjusted and regained some of the losses, but we are not out of uncertainty ... We have to be careful,” Al-Sayari said in an interview. “The global economy seems to be in a better shape than people thought, like 3 months ago. But developments in financial markets have to be watched with carefulness ... We have to wait and see. Fundamentals are okay so far.”
Global stock markets have recovered somewhat after a steep slide in Chinese stocks and worries about slowing US growth sparked a flight into safer assets, but on Friday were still almost 4 percent lower than Feb. 26.
Al-Sayari added economic growth in Europe and Japan was picking up speed and helping “major engines” such as China, India, the United States or the Middle East. Al-Sayari said a sudden reversal of the optimistic view of the global economy posed a risk. “We have to worry all the time. We review areas of potential risks and we have to think about them. (If) China, Japan, Europe or the US go through a major reversal in their economic development, that’s bound to influence the global economy,” Al-Sayari said. He said other risks to the global economy included an equity market crash, problems on exchange rates, geopolitics in the Middle East as well as falling oil prices, particularly for Saudi Arabia.
Al-Sayari also said the Group of 20 financial chiefs might discuss commodity issues at their annual meeting in South Africa later this year.
Al-Sayari said Gulf Arab states are still working to introduce a single currency by 2010 but this deadline has become tight and a delay is possible.
Al-Sayari also said all options are open on what type of single currency the Gulf Corporation Council (GCC) will have and possibilities include one with a peg to the dollar or a currency basket.
The timeframe for introducing the GCC single currency looked uncertain after Oman, one of the six members, said in December it was pulling out of the 2010 deadline.
