How to assess the Gulf economy?
The Doha skyline (Albawaba/J. Zach Hollo)
Economics is sometimes referred to as the dismal science, although the reason is apocryphal and vague rather than (as you might imagine it would be) that its workings are dismally unscientific.
You will find on the one hand that the subject is dominated by statisticians, who are either measuring something that’s not very interesting or meaningful, or prognosticating about what will happen to key indicators or business activity or the markets, on the basis of a spreadsheet model.
You will equally, on the other hand, find that in the real world, humanity adjusts its behaviour, according to the evolution of events and rapid spread and digestion of information, so defying reliable predictability and inviting unintended consequences from policy actions based on interpretations of the past.
And moreover, you will find on the other (theoretical third) hand that economists are fond of resorting to alternative scenarios that keep them from having to stick their necks out too far in predictive mode, given that they know they don’t know, and (unlike fund managers, say) are generally not rewarded for their forecasts so much as their original plausibility or marketing capability.
In most cases around the globe, most of the time, the debates that result from the uncertainty that bedevils economics actually matter, since they affect government policy, with severe implications for whether prosperity is created and how it is then distributed.
The global financial crisis and its aftermath have merely mutated the traditional arguments, insofar as they have (i) presented particular, and particularly difficult, dilemmas in the linkages between banking systems, and private and public sector indebtedness, but yet (ii) spilled over into the business cycle in such a way as to allow economists to revert to their well-known standpoints on what policy makers can achieve by — essentially — spending further money, whether borrowed or (these days) simply printed.
No free lunch
To a great degree, that cauldron of discussion is populated still by those who variably insist there is no free lunch, and that a prolonged, unsubstantiated boom means an unavoidably prolonged bust, or conversely that government can and must make a vital difference to what (remains of) the market would otherwise deliver.
In some other, rare, cases, however, deciding where to be in that discourse pales into insignificance, because the economic data are sufficiently comfortable, and essentially independent of policy making attentions (at least in the short term) that nobody needs to care.
It might just be that the Gulf slips easily into that category right now, judging by the research disseminated by staple providers in the region.
Of course, the longer term is another story, but for the mainstream believers in Keynes, that really doesn’t matter compared to continually âkickstarting’ the economy.
In the Gulf, however, on that point, there is clear acknowledgement that the region’s demographics pose a challenge to create jobs beyond the inherently subsidised environment of the state. There is a keen awareness that industry and services will have at some point to become more self-sustaining, given that the peninsula’s resource endowments will not last forever, notwithstanding the ever-increasing sophistication of technology.
Cocoon of contentment
But the headline economic numbers as they appear now allow the perception of a regional cocoon of contentment, compared to the disturbed and fractured circumstances that prevail elsewhere, including in countries within Mena which can remain namelessly obvious.
A glance at the latest coverage by the likes of Standard Chartered can only induce a sense of summery insouciance. Economic growth rates are strong but not overheated, inflation is present but not out of control, and the balance of payments on current account is enviably strong — pretty much across-the-board. Why? Because the region remains relatively early in the recovery phase from its unusual trough, and oil prices are projected sideways for the foreseeable future, at roughly $100 (Dh367.25) a barrel.
OK, so financial markets are somewhat brittle, still taking their cue understandably from the fragile and doubtful international context, but the fundamentals governing the immediate and even medium-term outlook are plainly positive.
It’s easy to imagine the economists covering the Gulf being either bored with the one-dimensionality of it all, or taking an agreeable sojourn from the rigours of forecasting, and issues for resolution, that present themselves in other regions — whether the U.S., Europe, China, Japan, or emerging markets. Here, until inflation threatens to impose itself again, even the dollar peg and concern for persistently abject interest rates have disappeared from the radar.
So, there’s no ready-made bone of contention, nothing much to stir the juices of informed altercation; certainly no evident grounds for controversy. In the lazier days of the season, that’s doubtless to be welcomed.
Spare a thought, though, for those analysts who have to make record, presentation and apparent insight from economic conditions that seem as unrelentingly familiar as a Gulf weather forecast. Not so much dismal as grimly incessant.
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