Steve Forbes notes UAE economy recovering faster than USA as Saudi Arabia boomsPosted on 22 October 2012 with 1 comment from readers
On the first day of the Forbes Global CEO conference being held in Dubai editor-in-chief Steve Forbes contrasted the rosy outlook for Dubai with his lacklustre expectations for fourth quarter growth in the USA. Growth in the UAE is being driven by an even bigger boom in neighboring Saudi Arabia where record oil incomes are being spent domestically to bolster support for the regime during the Arab Spring.
‘Dubai is becoming a global crossroads between East and West. It’s become a hub, a centre for world trade,’ noted Mr Forbes. ‘The fourth quarter in the US is not going to be very good … Dubai’s performance is going against the global trend.’
An article in The National today highlights the boom in neighboring Saudi Arabia which is boosting trade and tourism in Dubai. The IMF expects the kingdom to be among the fastest growing global economies this year with seven per cent growth in GDP, the result of a $130 billion stimulus package announced last year.
This has gone directly into Saudi pockets with a 15 per cent pay rise for all government employees and two-month salary bonus as well as huge infrastructure and employment projects.
Government spending topped 24 per cent last year, the highest in a decade with a national budget of $214 billion. Saudi Arabia’a all-Islamic banks are also in far better financial shape than most of the world’s banking system. Bank loans jumped by 16 per cent in Q1.
There have been record drawings from ATM machines in the kingdom as consumers rush to spend their new wealth. Over the summer an average of $14.4 billion was withdrawn every month in Saudi Arabia from ATMs. With Lebanon in crisis many got into their cars and drove to Dubai for a spending spree in the city’s malls and hotels.
The Saudi boom is clearly contingent upon high oil revenues continuing into the future. That is its achilles heel. Most Saudi crude heads east and not west these days and the Asian economic slowdown is thus an obvious worry. However, money printing by the global central banks is presently supporting very high oil prices despite the economic slowdown.
In the meantime the good times are back in the Gulf States as Mr. Forbes correctly observes as he flatters the CEOs of the region.