First off, a Happy New Year to all. On this happy note, let’s sift through some of the key economic developments in the past year and prospects for progress in this one. These changes have directly affected the living standards of all social segments and hence worthy of being discussed in detail.
It is true that there are reports circulated by the media and on some social media platforms, but many of these express the special interests of individual countries and institutions rather than an objective assessment. However, what we are care about is to provide a neutral and locally relevant assessment.
Let’s take oil, the most important commodity for the GCC. Oil prices are largely dependent on economic conditions and growth and influence living standards in the region. A barrel’s value increased by 20 per cent in 2019 to exceed $68 by year-end. This despite the expectations of a probable dip in prices, as suggested by some experts.
Opec’s decisive act
However, the “Opec+” agreement, which aimed to reduce production and potential resolution of the trade dispute between the US and China contributed to a hike prices and range between $55-$65 a barrel this year. This is an appropriate price for producing and consuming countries alike, if the geopolitical situation in the Arab region stabilises.
The highlight of the year was also the inflated stock prices worldwide, gaining 24 per cent to add $17 trillion and bringing the total value of traded shares to $87 trillion. Yet, this does not reflect the true value of these shares or the actual performance of listed companies.
This is because central banks policies still forcefully promote quantitative easing, which has led to exaggerated stock price hikes by absorbing a large part of the freely available liquidity. This has exposed global stock exchanges to inflated values and swelling into a bubble that could explode at any time in the near- to midterm, which will cause incur heavy losses for investors, especially recent entrants.
The real estate markets in various countries have been recording varying declines, as evidenced by the economic conditions in many countries, especially in those where the sector has considerable economic clout.
According to official data, property prices are expected to stabilise or fall at slower rates than last year. As for gold, another driver of the global economy, rose by more than 17 per cent last year to exceed $1,510 an ounce. According to indicators, gold will continue to achieve further gains because of geopolitical conditions, trade wars and monetary instability caused by quantitative easing and the possibility of a stock market bust.
This means that the yellow metal is the safest and most secure investment for the immediate future.
The global economy will experience extra turmoil, especially as new discoveries in artificial intelligence could bring forth more contradictory phenomena. At a time when IA technologies will contribute tremendous progress to human development, it will be accompanied by new challenges difficult to deal with.
The global economy will achieve modest growth in 2020, after dropping to less than 3 per cent last year from 3.6 per cent in 2018. Growth is not expected to exceed 2 per cent this year, thus going through its weakest state since the 2008 crisis.
As for the Gulf economies, growth will revolve around 1.5-2 per cent, according to the International Monetary Fund. It indicates Gulf economies must keep adapting to the rapid developments unfolding worldwide.
Mohammad Al Asoomi is a specialist on economic and social development in the Gulf.