Gulf economies will 'bounce back'

MANAMA // The global credit crisis is hitting Gulf economies, but they will weather the impact and begin bouncing back in about a year, business executives and government officials predicted today. "There will be a scaling back of the most ambitious real estate projects, but the economies of this region are robust," said Sheikh Mohammed bin Essa, the chief executive of the Economic Development Board of Bahrain. The key drivers of the Gulf economies - oil and gas, energy-intensive industry and growing populations - had not changed, he said. "Oil and gas will remain a pillar of the global economy for years to come, no matter what price it is," he said on the sidelines of the Financial Times Property Conference in the Bahraini capital, Manama. "We do have a role to play in the times to come." Sheikh Mohammed spoke during a grim week for the Dubai property market, when Nakheel, the developer of the Palm Jumeirah and a planned 1.4km tower, announced it was cutting 500 employees and delaying some of its signature projects. Bahrain, too, is seeing a softening of prices in some quarters as developers and home buyers struggle to get loans. Amin al Arrayed, the general manager of First Bahrain Real Estate Development Company, said land prices in Juffair - one of the centres of Manama's construction boom - had dropped by 20 to 30 per cent. "There is a lot of price pressure," Mr Arrayed said. Marios Maratheftis, the regional head of research for Standard Chartered, put it bluntly: "The property price cycle has turned." But he said the region would be one of the first to bounce back in as little as a year from now, because of solid demand and a sharp shortage of housing. "We will see a slow 2009, with significant delays and cancellations of projects, but I am expecting a soft landing for GCC economies," Mr Maratheftis said. However, he said the emergency funds made available to banks by the Central Bank were not being tapped by the lenders because they were wary to signal to the market that they were having troubles. Another Dh40 billion (US$10.9bn) - on top of Dh70bn directly injected by the Department of Finance and Industry - would probably be needed to get capital markets operating again, he said. The arrivals of two new home-finance providers - the federally backed Emirates Development Bank and Abu Dhabi Finance - were lauded as a means to getting the property markets on track, because they had targeted middle-income home buyers, or end-users. "There is a structural shift in the business of real estate development... to affordable housing," said Gurjit Singh, the chief property development officer of Sorouh Real Estate. "The volume is there. It is a relatively large, untapped market." bhope@thenational.ae