The bustling view of the changing cityscape from the windows of the Dubai International Finance Centre brings to mind a question once posed by Marx - not Karl, Groucho: "Who are you going to believe, me or your own eyes?" For the better part of a year now, pundits on Wall Street have been warning that the boom we see around us is doomed. The financial turmoil there, they say, is creating a bottomless pit that will suck in economic growth, starting in the US and inevitably consuming the once booming, export-dependent economies of Asia, Brazil, Russia and the Middle East. As the mighty US consumer succumbs to the housing slump, the rest of the world's economies would bow in submission to his waning demand for their products.
And behold, emerging market stocks have tumbled and growth in the emerging economies has begun to slow, prompting the proponents of the alternative view - that emerging markets have achieved sufficient demand among themselves to offset the slowdown in the US, or decouple from the US economic cycle - to disappear. But high above the cranes and budding skyscrapers of Dubai, the sky does not yet appear to be falling. Here, far from Wall Street's gloom, the centre's chief economist, Nasser Saidi, offers a decidedly more optimistic viewpoint. "The fact is that eight months into 2008 the emerging markets are doing reasonably well," he says. "Those stories coming out of Wall Street reflect the doom and gloom of Wall Street. The rest of the world is not sneezing and coughing."
Emerging economies appear to be on track to slow only slightly this year. Citigroup forecasts that China's growth will slow to 9.8 per cent this year from almost 12 per cent - a pace that many economists had long warned was overheating. India's growth is projected to slow to 7.7 per cent, Brazil's to 4.6 per cent and Russia's to 7.3 per cent. Mr Saidi sees little evidence to support predictions of a global recession. True, inflation has grown to the point that real growth is likely to be negative in many emerging economies and slower growth may be insufficient to absorb new jobseekers. But growth and rising prices are symptoms of what Mr Saidi says is the sectoral shift in emerging market economies from relying on exports to the developed world to relying on trade with each other and investment in their own infrastructure.
These massive investments, many of which are visible from Mr Saidi's office window, are helping to diversify economic activity and boost productivity. From the Gulf to India to China, the structure of economies is changing, he says. China is constructing dozens of cities every year, a trend that mining companies have used to explain why the boom in commodities demand is unlikely to fade any time soon. New cities need new airports, roads, hospitals, universities, schools and the amenities needed to cater to the new bourgeoisie.
Falling barriers to trade and investment, both in Asia and the Gulf, are producing new opportunities and economies of scale. And new sources of growth have emerged, not only in China and India, but in the former Soviet states of Eastern Europe and Central Asia, in the Middle East and in Africa. These countries are benefiting from exports of raw materials like oil and gas, and of workers whose remittances are contributing to their growing affluence.
With their growing piles of wealth, consumers in emerging economies are able to buy products once limited to Western consumers, like cars, mobile phones and personal computers. In addition to lifting living standards, products like these are raising productivity across the emerging world, lifting real wages, creating jobs and producing home-grown multinationals. As a result, Mr Saidi says, decoupling is already underway. Emerging market exports have slowed, but they are still growing even as US imports decline, implying that new markets have sprung up to offset lost US demand. Last year, according to the International Monetary Fund, emerging economies accounted for more than two-thirds of all the economic growth in the global economy. And for the first time in modern history, the growth in China's economy last year surpassed growth in the US.
Many remain sceptical that this trend is yet significant. "We're seeing it, but it will take time," said Marios Maratheftis, an economist at Standard Chartered Bank who works in an office nearby to Mr Saidi. "We need to see stronger middle classes in India and China. We need to see the Asian economies dependent on domestic consumption, rather than external growth." But there are signs that this also may be happening. According to Merrill Lynch, growth of Chinese retail sales in June exceeded the growth of Chinese exports for the first time. That explains why Coca-Cola has decided to spend US$2.5 billion (Dh9.1bn) to buy the Chinese juice maker Huiyuan.
In the Gulf, Mr Saidi says, the construction-led boom is sheltered by the vast and growing pile of oil revenues and foreign exchange reserves held at sovereign wealth funds and central banks. As a result, he predicts that the Gulf will remain what he calls an "oasis of tranquillity in a sea of turbulence". And seeing, at least from where Mr Saidi sits - even if his neighbour down the hall does not agree - is believing.
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