Gulf will weather the global financial crisis

The Gulf will continue to grow, albeit at a slower rate, indicating that GCC is not in a crisis, said experts. Dr Muhammad Al Jasser, Vice-Governor, Saudi Arabian Monetary Agency (Sama), said: “Do you even know the real picture? We are receiving winds of contagion from the West but we do not have the crises that are swirling Wall Street. The important thing is to look at profitability and the balance sheets of the banks and they will appear good. “If you want to disregard the profits made by the banks and focus on the negative side, it is not fair. We will weather this. This is not being self congratulatory but there is no point in looking at a glass that is half empty.” Dave Ulrich, professor of business at the University of Michigan believes that GCC will stay over the crises. “I do not have an exact answer as to when the region will come out of this but most people say it should take about one year. I think the region will just stay over the crises,” he told Emirates Business. Giving the example of the Saudi banking sector, Dr Al Jasser focused on the strong fundamentals in the region. “Our banking sector has shown good results and remains resilient amid global crisis. Saudi reserves have increased from SR157 billion (Dh156bn) in 2002 to SR1.3 trillion today. The banking sector has a leverage ratio of eight per cent and 120 per cent deposits are deployed domestically,” he said. Moreover, unlike the West, the GCC governments have followed a rather conservative policy, thus avoiding any kind of crash in the banking sector seen in the United States and Europe. “We have one of the most demanding and conservative supervisory regimes. We are very tough. Market economy is prone to excesses and if you do not have a regulator things will happen. “We have a very developed corporate governance structure. There are two external auditors for each bank with an internal audit department and have a compliance officer – all that has paid well for us,” he said. “Our domestic economy has absorbed all the liquidity. Our banks are also involved internationally but that is extremely small and does not exceed 11 per cent of the balance sheet, so the exposure is very small. On the macro economy level global financial crises is neutral, there is very little consumer debt, banks have healthy balance sheets without over leveraging and our government has paid off its debt and has built very large foreign reserve,” he said. Shuchita Kapur