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Experts say situation will improve
Finance experts at the World Economic Forum's inaugural summit on the Global Agenda said that though coordinated policy response to the financial crisis has been triggered worldwide, it will take a while before the situation improves.
- By Gaurav Ghose, Financial Features Editor
- Published: 22:50 November 8, 2008
Dubai: Finance experts at the World Economic Forum's inaugural summit on the Global Agenda said that though coordinated policy response to the financial crisis has been triggered worldwide, it will take a while before the situation improves.
For emerging markets, including the Middle East, they said there are lessons to be learnt and opportunities to taken advantage of during this crisis.
"It's going to be rather unpleasant ... [and] there will be other collateral damage," said Howard Davies, Director of London School of Economic and Political Science and a former chairman of the UK's Financial Services Authority.
"Which other areas will require government intervention," is not clear as the crisis unravels itself, he said. "One clear message from our discussions here for the G-20 is that governments must in no sense lift their guards at this point."
"Governments must be careful not to overreact," said Davies, adding that there needs to be a greater accountability in the international financial system, he argued.
It's not just Wall Street but also Main Street that's going to be hit, experts agreed.
"It's going to be really tough [for consumers]," said Mohammad A. Al Erian, Managing Director, Co-chief Executive Officer and Co-Chief Information Officer, Pacific Investment Management Company, USA.
Not only will the credit crunch continue making it difficult to secure loans, but also employment will be hit. Wealth will be hit too, which means one has to recognise the loss and move on and in the days ahead one has to save more, he said.
That the worldwide crisis did not even spare the Middle East, was evident when wholesale cross-border fund flows stopped overnight, Al Erian said, with the central banks rightly coming to the rescue.
But he sees an opportunity arising out of this crisis for the region.
"It's going to encourage the correct type of regional integration in the Middle East," Al Erian added.
Soud Ba'alawy, executive chairman, Dubai Group, reminded the audience that what this crisis has thrown up is that countries and businesses indebted themselves beyond their means and excess leverage was unsustainable.
Even in UAE, there will be an impact of the recession and "each and every business is going to be challenged," Ba'alawy said, adding, business models have to be looked into, even accounts.
But, he also pointed out to the great prospects that exist for the markets here. Investment banks of the region, he says, have liquidity, have deposits, are regulated by the central banks, and most of them are 80 per cent down in terms of pricing.
"My message in this fear and panic - there is also a great opportunity," Ba'alawy said.
This crisis also offers a critical chance for the world to restructure the international financial system, according to the experts.
"Problems are parents of solutions," said Suzanne Nora Johnson, senior director, Goldman Sachs, USA.
"This gives us great opportunities to find solutions and new ways of looking at the world."
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