Saxo bank outlook 2012: a year of great change

MENA region faces headwinds but should manage 3.5 percent growth in GDP as domestic demand returns.

Saxo Bank, the online trading and investment specialist, in its Q1 2012 Financial Outlook, believes that a perfect storm is pending as tensions are mounting unbearably. The combination of the ongoing EU crisis, slowing aggregated global demand and rising social tensions will leave no nation untouched and could result in the most pivotal year by far since 2008. Overall, the Bank looks for world growth to slow in 2012 to 3 percent.

Saxo Bank believes that a renewed crisis in the EU is inevitable as the leaders of the Union have failed to address the fact that the sovereign debt crisis is one of solvency and not liquidity provision, and its growth outlook for Europe is mostly negative. In the US, growth will likely be somewhat stronger than elsewhere. In Asia, growth will likely look far weaker than consensus, as China faces some heavy lifting on rebalancing its economy. Uncertainty is great in this area as the regime is capable of forcing activity and behaviour to a degree not attainable elsewhere.

The surge in commodities in 2011, partly due to the initiation of the US Federal Reserve's Quantitative Easing 2 programme, saw the outlook for the Middle East and North Africa (MENA) improve. As the effects of commodity speculation fade, the MENA region faces headwinds though it should manage around 3.5 percent growth in GDP as domestic demand returns. Crucial for economic growth are stabilisation in the political sphere following a roller coaster ride in 2011, which saw several changes of government including that of Libya.

Steen Jakobsen, Chief Economist at Saxo Bank comments: "The perfect storm is coming but there is no need to panic. We are optimistic that 2012 will be a year of great change and a perfect storm in the MENA area is based on good underlying fundamentals combined with almost imperfect visibility on geopolitical risk."

Mr. Jakobsen adds: "We expect oil prices to remain range bound this year as global growth eases and investments are needed for the region to continue to prosper and become less dependent on oil for economic growth. We look for the rapid rise of Qatar to continue this year though growth will be markedly lower than the ebullient years of recent times. GDP is set to rise 6 percent after double digit growth in previous years. Bahrain, Egypt and the United Arab Emirates are expected to be among the laggards of the region albeit moderate growth of around 3 percent is still expected."

Mr. Jakobsen visited Dubai on 1 February to discuss the Bank's outlook for the financial markets with financial media and professional investors of Saxo Bank (Dubai) Ltd, a wholly owned subsidiary of Saxo Bank A/S.