Middle East hit hard by 2002’s poor global economic performance
Last year’s poor economic performance in the US, Europe and Japan has caused sluggish growth in emerging markets such as the Middle East. Although global economic recovery is underway, it will only witness a slow pace of growth in 2003, reported the Economist Intelligent Unit (EIU).
“The business sector is suffering from over capacity and poor access to capital. Only a more proactive fiscal policy in the G-7 countries can make a significant difference to this,” said Regional Director, Middle East and North Africa, Hania Farhan at a seminar on “Economic & Business Outlook for the Middle East.”
She identified that the key risk factors affecting the global economy are the looming US – Iraq war and spiralling oil prices. The high current account deficit and personal sector debt in the US and the emerging markets debt are other factors that are affecting the global economy.
“The sluggishness seen in global demand has significant consequences. Investors are now more risk averse. They are increasingly becoming security conscious. This has led to drastic changes in the business strategy and operating environment especially in the Middle East, manifesting in poor investments and tourist flows and higher cost of capital,” Hania added. She said that “there is a total lack of investor confidence.”
Hania commented that financial sector reforms are essential to support development of the private sector as new ventures will necessarily need long-term support of capital and deeper financial markets to mitigate liquidity risks. This in turn implies that the financial sector will need better information and legal systems to effectively manage operational and credit risk. — (menareport.com)
© 2003 Mena Report (www.menareport.com)