The global economy is under threat of possible strikes by the United States on Syria and its possible economic impact.
The expenditure involved in a military operation is a big challenge for the international economy. A huge amount of money will be earmarked for this purpose, to get rid of political influences that are going to impact for sure on economic growth.
The possible strike will make bad to worse an economy that is still suffering from the crisis of 2008 and the challenges of Arab Spring that pose a threat to economic growth in the Middle East.
The possible war on Syria has had a psychological impact on financial markets and stock exchanges and on the aspirations of stockholders. Some of these investors will maintain their investments in the stock market, particularly those in emerging economies in the Middle East, while others say they will pack up and leave or even wait to see what will happen next.
From an economic point of view, the international economy has not recovered from the economic crisis of 2008. The economy faces tough challenges, including fluctuations in Arab stock markets caused by the political unrests in the Arab Spring countries. Financial crises in the euro zone as well as public demands for social and economic reforms in these countries make the situation even worse.
Major changes happen in our day-to-day lives every now and then. Investors always look for safe places to invest, including stock markets, real estate, foreign currency, gold and other precious metals and foreign investments.
When we look at economic growth in the Middle East, we find that Arab markets are the best due to government support to overcome problems, though it needs a lot of money to rebuild after destruction caused by political turmoil.
When it comes to the countries of the Gulf Cooperation Council, we find that the financial sector is the locomotive of economic activity in these countries. This was a fact highlighted in a recent QNB report.
The report lauded Gulf banks for successfully dealing with the impact of the international economic crisis with support from the governments of GCC states. Financial surpluses in these countries played an important role in overcoming the crisis. The ability of banks in these countries to be part of major infrastructure projects had the same effect. The banks managed to carry on local and foreign economic activity through their investments.
The gains of banks in GCC countries increased with their ability to win the confidence of their clients in these countries. These banks had managed to finance construction and service projects in their countries.
This is perhaps one reason why the QNB report described these banks as being immune from the turbulence that usually haunts emerging markets, thanks to their strengths as well as the growth of revenues from petroleum and natural gas exports. Generous support offered by the governments in these countries also plays an important role in this regard.
I would like to refer here to the role of Qatar, which in 2008 bought the shares of local banks in Qatar Exchange in a deal worth $1.8bn. Qatar invested around $4.12bn in real estate. It also set up investment risks reserves.
The report says growth in the assets of the banks will continue despite difficult conditions in emerging economies because of the rise in oil prices and an increase in non-oil economic activity. This activity saved the banks from bankruptcy.
The GCC countries had very limited dependence on foreign capital in financing their economic activity. Surpluses from oil exports led to the creation of a solid financial ground that made the GCC countries safe from the impact of political turmoil. These surpluses also improved the work environment in these countries and opened new doors for the financial sector.
The report of the International Monetary Fund (IMF) suggests that local demand for oil and sufficient foreign currency reserves as well as political stability of a country reduces the impact of financial crises.
Meanwhile, the QNB report expects that GCC banks will lead international economic growth. However, the international credit rating agency Fitch expects economic growth to slow down in the GCC countries due to the impact of international oil prices on the market.
Despite this, the governments of the GCC countries still depend on high returns from oil exports as well as the non-oil economy and the flow of many companies and investors into the region.
Fitch expects this region to be immune from the negative factors that have haunted the international financial sector, which faces an uncertain future. It said most of the challenges facing the Gulf financial sector were foreign ones and that an American financial downturn, if it happens, it will have short-term effects.
The financial sector in the GCC countries benefits from political and economic stability. The IMF expects the Qatari economy, for example, to grow by 5.2 percent between 2012 and 2017, compared to average economic growth of 3.5 percent in other GCC countries.
Such growth in Qatar and other GCC countries will help them benefit from both local and foreign investments if it persists until the year 2022. It will also give confidence to investors in these countries and protect them from the risk of money laundering.
