The approaching avalanche? How a US debt default can hit the GCC hard

The approaching avalanche? How a US debt default can hit the GCC hard
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Published October 10th, 2013 - 11:40 GMT via SyndiGate.info

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Gulf central banks and sovereign wealth funds which are big investors in US treasuries are likely to feel the pressure of eroding confidence in dollar.
Gulf central banks and sovereign wealth funds which are big investors in US treasuries are likely to feel the pressure of eroding confidence in dollar.
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Washington
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National Bank of Abu
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JP Morgan
,
Xinhua News Agency
,
Lehman Brothers
,
Zhu Guangyao
,
Fahad Al Mubarak
,
Giyas Gokkent
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US Treasury
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US government
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US Federal Reserve
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Saudi central bank
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Kuwait Finance Centre

Global financial markets are waiting with bated breath on the outcome of the political impasse in Washington on US government shutdown. With a few days left for the government to reach a decision on the debt ceiling on October 17, any failure could have disastrous consequences for global markets and economies.

With the debt ceiling deadline drawing closer, the pressure is being felt across the GCC markets and economies. Apart from the equity market mayhem that could follow the default, economists and analysts fear wider implications in terms of higher interest rates, loss of confidence in dollar denominated assets and a surge in prices arising from imported inflation as the dollar slides in value.

“A protracted period of default — highly unlikely — would lead to massive uncertainty and an economic slowdown which would also have adverse global repercussions. Linkages to the GCC would be on multiple fronts, ranging from the impact of a US slowdown weighing on oil prices, financial market spillovers, and so on,” said Giyas Gokkent, chief economist of National Bank of Abu Dhabi.

Gulf central banks and sovereign wealth funds which are big investors in US treasuries are likely to feel the pressure of eroding confidence in dollar.

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