As stock markets take a beating and policymakers across the world try to resuscitate economic growth, observers say a return to a global downturn would be an all-out disaster for investors, businesses and average consumers everywhere.
Financial Fallout: Read The National's coverage of the global economic chaos
Local tourism and retail at some risk Consumer spending is expected to remain buoyant across the Middle East should there be another economic slowdown across the world. Read article
UAE banks proactive on mortgages UAE lenders are starting to aggressively target homebuyers for the first time since US mortgage defaults sparked the 2008 global meltdown. read article
Asia may put GCC on slippery slope An economic slowdown threatens fuel demand, but Opec is likely to act if oil prices far too fall. read article
Small businesses can take shelter With the threat of a second global downturn looming large, both small businesses and investors have a lot to lose. read article
Threat to US and EU but Gulf set fair Financially, the region is in a better position to weather storms. read article
If consumers scale back amid higher unemployment and fear for their financial futures, businesses would suffer because of declining demand. Many companies would choose not to invest in new factories or research and development, worried that returns would not justify costs.
Declines in global markets could breed more consumer panic when investors look at their brokerage statements and find themselves poorer. Investment banks that grease the wheels of global capital would see their fortunes decline, too, with fewer mergers to advise on and less investment advice to give.
The world has yet to lurch back into a situation akin to 2008's slowdown, but recent market declines and worse than expected economic data from the US and Europe have fuelled speculation another crash might be imminent.
"There's going to be a dampening in global economic activity," says Dr Giyas Gokkent, the chief economist at National Bank of Abu Dhabi. "The stock price declines will create a wealth effect, but the scenario now is slower global growth - but growth nevertheless.
"For things to turn into a meltdown of the type we saw in 2008 there would have to be some major policy mistakes in the euro zone."
The problems facing the world economy now are legion, and span both emerging and developed countries in the Americas, Asia and Europe.
US consumers - the wealthiest group of consumers in the world - spent less money in June than the month before, according to recent official data. That was the first spending decline in two years. Manufacturing activity in the world's largest economy is also stagnant, recent figures showed.
And with worry still surrounding its US$14.3 trillion (Dh52.52tn) of government debt, the US's credit rating was recently downgraded by Standard & Poor's to "AA plus", the first time the country has had its rating reduced.
Europe has its own set of ills to contend with, most prominently a crippling sovereign debt crisis that started in Ireland, Greece and Portugal but now threatens to spread to Spain and Italy.
The European Central Bank recently kept interest rates at 1.5 per cent in an attempt to spur lending, and began buying up the debt of its troubled countries. Germany wants to avoid spending billions of euros on another bailout just to keep the euro zone intact, but it might have to if it wants to keep the single-currency bloc's shaky economic union intact.
Asia's fast-growing emerging countries are also increasingly on the ropes, although economists still hold out hope they will perform better than Europe and the US if another downturn takes hold.
Most emerging Asian countries do not have major debt woes, and their banking systems are generally in good shape.
"Another sharp fall in global output would see Asia hit hard initially," Gareth Leather, an Asia Economist at Capital Economics in London, said in a recent note.
"However, as in 2009, Asia's strong economic fundamentals should ensure that the region would recover relatively quickly."
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Results
3pm: Handicap (PA) Dh40,000 (Dirt) 1,000m; Winner: Dhafra, Antonio Fresu (jockey), Eric Lemartinel (trainer)
3.30pm: Maiden (PA) Dh40,000 (D) 2,000m; Winner: Al Ajayib, Antonio Fresu, Eric Lemartinel
4pm: Handicap (PA) Dh40,000 (D) 1,700m; Winner: Ashtr, Abdul Aziz Al Balushi, Majed Al Jahouri
4.30pm: Handicap (TB) Dh40,000 (D) 1,700m; Winner: Falcon Claws, Szczepan Mazur, Doug Watson
5pm: Sheikh Dr Sultan bin Khalifa Al Nahyan Cup – Prestige Handicap (PA) Dh100,000 (D) 1,700m; Winner: Al Mufham SB, Al Moatasem Al Balushi, Badar Al Hajri
5.30pm: Sharjah Marathon – Handicap (PA) Dh70,000 (D) 2,700m; Winner: Asraa Min Al Talqa, Al Moatasem Al Balushi, Helal Al Alawi
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
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A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
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UAE currency: the story behind the money in your pockets
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
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THE SPECS
BMW X7 xDrive 50i
Engine: 4.4-litre V8
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
BULKWHIZ PROFILE
Date started: February 2017
Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)
Based: Dubai, UAE
Sector: E-commerce
Size: 50 employees
Funding: approximately $6m
Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
