Beirut: The crisis in Europe is a "warning bell" on how the Gulf states should be run and may impact the region's economies by reducing oil demand, panellists at a conference said yesterday in Beirut.
A slowdown in the euro zone economy as a result of the mounting debt burden may hurt exports, tourism and remittances in the Arabian Gulf and North Africa, said Henry Azzam, chief executive officer for the Middle East and North Africa at Deutsche Bank.
"To stop the decline in oil prices, Gulf countries could be forced to reduce production," he said. "By doing so, the real oil-sector gross domestic product will decline. So we start with a financial problem and end up with a real problem," Azzam said.
Crude oil was poised for a third weekly decline yesterday. It was down 0.8 per cent at $70.26.
Kuwait's deputy prime minister for economic affairs Shaikh Ahmad Al Fahd Al Jaber Al Sabah said at the conference on Thursday that Greece's debt crisis has provided an important trial-run for a common currency union in the region.
"It's a warning bell, and it implies that we should revise the economic models within our states," Shaikh Ahmad said.
"We are monitoring the situation in Greece very closely," Shaikh Ahmad said, adding that the GCC states should continue to watch the implications of Greece's sovereign debt crisis on the euro common currency. "We must monitor this experience before the GCC states embark on it, to see its positives and negatives," he said.
Shaikh Ahmad said oil prices were being driven by geopolitical problems.
Dubai World shows way in managing debt
Dubai World's agreement with its core bank creditors to extend maturities on loan repayments sets an example of how Greece could manage its debt problems, Deutsche Bank's regional chief executive Henry Azzam said yesterday.
"They started a process, the market is favourable, it's an indication of how things should be done," he said. Azzam said the restructuring deal could be an example for Greece, whose sovereign debt troubles continue to weigh on global markets, despite a rescue package.
