, Middle East and Africa
, Finance and Banking
, Gulf Cooperation Council
, Saudi Arabia
, United Arab Emirates
, Current Financial Crisis
, Systemic Risk, Vulnerabilities and Asset Bubbles
Although the global crisis combined with the Gulf's own credit squeeze has had a large effect on Middle Eastern economies, the greatest risk stems from the exposure of its banks and declining oil revenues. Other risks include the dollar peg, reductions in domestic project financing and declines in foreign investment inflows.
Many governments have stepped in to provide funds to banks, guarantee deposits and transfers to citizens or corporations. However, the UAE remains among the most vulnerable given its debt position and the leverage of Dubai's property sector. Losses overseas have led foreign investors to withdraw from GCC equities, and a falling oil price has evoked worries about equity performance. Despite this, some equity markets in the Levant and North Africa remain the best global performers.
The Maghreb countries were more insulated from the global crisis than other countries due to domestic reforms, relatively shielded financial sectors and heavy public expenditures. Lower FDI and remittances from a slowdown in the GCC, left the Levant vulnerable—especially Lebanon and Jordan.
While the global recession will reduce demand for the region's resource and non-resource exports, the global liquidity crunch will reduce capital inflows into the region. Moreover, non-performing loans are likely to rise in the GCC as property markets suffer, and both tourism and remittances decrease.
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