Business | Markets
Central banks should take concrete steps
The global financial crisis has not even spared the Gulf Cooperation Council (GCC). In a matter of four trading days this month, Dubai Financial Market and Abu Dhabi Indices fell by 25 per cent and 19.7 per cent respectively.
- By P. Krishna Murthy, Special to Gulf News
- Published: 00:31 October 9, 2008
Dubai: The global financial crisis has not even spared the Gulf Cooperation Council (GCC). In a matter of four trading days this month, Dubai Financial Market and Abu Dhabi Indices fell by 25 per cent and 19.7 per cent respectively.
There is no other reason for the downslide, except for the exit of foreign investors from regional markets, who have their own problems back home.
However, there are definite signs of moderation in GCC capital and money markets following recent increases in interbank rates. The GCC situation is quite different from that of the West, and yet given the globalisation factor, it will experience some challenges.
At times like this, when the liquidity squeeze is hurting the country's economy, it is for the regional central banks to intervene to maintain liquidity in banking sector. Kuwait has taken the initiative to reduce rates as well as ask Kuwait Investment Authority to have deposits with local banks. Similar move by other regional central banks will be helpful in preventing further deterioration in the system, created by external factors.
Largely, the GCC should cope well with the current situation and manage to notch up decent growth in the medium to long term. But timely actions by the government and central banks are essential for the short-term problems.
The writer is the CEO of Dubai International Capital.
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