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Gulf faces challenges as US economy shrinks
Gulf states face a new challenge to their dollar-pegged currencies because their economies are growing in contrast to the US, Bahrain's central bank governor said.
- Reuters
- Published: 01:04 February 8, 2008
Manama: Gulf states face a new challenge to their dollar-pegged currencies because their economies are growing in contrast to the US, Bahrain's central bank governor said.
"There is a new challenge here in the form of a new phenomenon - a weakening US economy, juxtaposed by huge econ-omic growth in the GCC and Asia," Rashid Al Maraj said in a speech to the First Business Roundtable with the Government of Bahrain in Manama.
"However, we are taking a long-term view of the issue; there will be no knee jerk reactions based on short-term trends," Al Maraj said.
Bahrain, the smallest Gulf economy, remains committed to its peg to the dollar, Al Maraj said.
Saudi Arabia, the UAE and Qatar have all faced pressure on their dollar pegs as the US currency weakens and inflation at home surges.
"Our judgment, based on our analysis of available information and projections of trends, cautions us against a rush to abandon" the peg, Al Maraj said.
Still, the Gulf, where economies are growing on a quadrupling of oil prices during the last six years, needs to be "vigilant because it is in boom times that mistakes are made and guards are let down", Al Maraj said.
There is a new challenge here in the form of a new phenomenon - a weakening US economy, juxtaposed by huge economic growth in the GCC and Asia."
Rashid Al Maraj
Bahrain central bank governor
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