Single currency 'will give GCC greater global clout'

Dubai: The prospects for a single currency between the six Gulf Cooperation Council (GCC) members by 2010 have increased as a result of the global economic downturn, according to an influential Dubai-based economist.

Nasser Al Saidi, chief economist at the Dubai International Financial Centre (DIFC), said that monetary union will allow the GCC increased influence in the global economy, and allow it to become "part of a new financial architecture". Indeed, a single central bank across the GCC would have much greater leverage over setting a unified interest rate and boosting economic activity in the region. On paper, the timeframe for GCC monetary union, from which Oman has opted out, remains 2010, but the deadline appears unrealistic, with slow progress by states on meeting convergence criteria, and region-wide high inflation in 2008 a particularly thorny issue.

The high level meeting in Dubai on Tuesday - entitled The World in 2009 - was hosted by the Economist Intelligence Unit (EIU) and assembled delegates from the business, financial and political domains.

It was broadly agreed that the impact of the global economic situation in the region only became more visible in the last quarter of 2008, with the EIU projecting growth in the Middle East and North Africa region to slow to 4.6 per cent in 2009 from the projected 6.1 per cent last year.

Disparities within the region are also projected to become sharper, with larger economies, including the UAE, seeing a more pronounced impact of the slowdown; the EIU predicts GDP growth of 1.5 per cent for the UAE in 2009, down from about 7.7 per cent last year.

"There will be no meaningful sustained recovery until 2010-2011," said Robin Bew, chief economist at EIU.

He added that "2009 is all about policy", which he regards as essential to ease the deleveraging process afflicting regional economies such as the UAE.

Economists and investors agreed that the need for a top-down response was essential.

Ahmad Al Khateeb, managing director and chief executive of Jadwa Investment in Saudi Arabia, said that "governments need this kind of shock to speed things up."

The UAE Central Bank has already guaranteed unlimited deposits, and has pledged to push ahead with increased public, and infrastructure and development spending, which should in turn send a positive signal to businesses to continue investments.

According to Al Saidi, a reorientation of the Gulf petro-economies' foreign spending towards more domestic issues is likely to be prioritised.