x Abu Dhabi, UAETuesday 25 July 2017

World business leaders hold no fear for UAE in Mena turmoil

Business chiefs expect the UAE economy to withstand regional shocks as unrest sweeps Mena region.

There are calls for the UAE to free-float the dirham.
There are calls for the UAE to free-float the dirham.

Business leaders gathering in Abu Dhabi this week downplayed the impact of political turmoil across the region on the UAE economy, instead highlighting the dollar-pegged currency as one of the country's biggest challenges.

Unrest continued to rattle the region yesterday with further protests in Oman and Bahrain, and fighting in Libya.

Meanwhile, Agence France-Presse reported that Saudi Arabia was due to announce a major cabinet reshuffle.

Questions over the future of the US dollar, to which the UAE currency is pegged, featured prominently this week at the Global Financial Markets Forum in Abu Dhabi. Nassim Nicholas Taleb, the economic adviser and author of The Black Swan, was the first at the forum to raise concerns about the greenback and the size of the US deficit.

Linking the rise in food prices to the Federal Reserve's strategy of quantitative easing, Mr Taleb said: "Ninety-five per cent of the problems we have in the world are the US debt. It's curable but at a very high cost politically. Meanwhile, what do you do? Avoid any scenario that depends on US health."

He was joined by the US billionaire investor Jim Rogers, who said the UAE would do well to abandon its peg to the dollar because of the Fed's loose monetary policy.

"The moment is coming when the flaws in the US dollar are going to come home to roost," Mr Rogers said.

"Being tied to the US dollar isn't a good way to run a currency these days. I would think your currency would be better off being free-floated. You've got gigantic reserves of oil. The US has gigantic reserves of debt."

Mr Rogers said the UAE would benefit from its oil reserves despite the state of the dollar.

"A commodities bull market is in place, no matter what happens to the dollar," he said.

While continuing political unrest throughout the region was unlikely to affect the local economy significantly, analysts said other parts of the Gulf may be at risk.

"We cannot avoid what's going on nowadays in North Africa and the GCC," said Khaled al Qubaisi, a senior adviser at Mubadala Development, a strategic investment company owned by the Abu Dhabi Government.

"Saudi Arabia has the biggest potential problems of the countries in the GCC … there's going to be a need for major reforms." But Mr al Qubaisi said the UAE would most probably avoid the tumult of other Gulf countries.

"We really look forward to the reforms that are going on and I think we're poised for great growth when that settles down," he said.

Fahad al Raqbani, the director general of the Abu Dhabi Council for Economic Development, said the unrest in the Middle East had not fundamentally altered the emirate's economic development strategy. "The 2030 plan hasn't changed. Our objectives are still the same," Mr al Raqbani said.

Michael Tomalin, the chief executive of National Bank of Abu Dhabi, said while the UAE's prospects might be experiencing "short-term buffeting", the larger challenge was to achieve the scale of growth necessary to meet Abu Dhabi's Vision 2030 plan.

"From time to time, there will be a challenge to keep our eyes on the ball," Mr Tomalin said. "We have to remember where we are trying to get to."

ghunter@thenational.ae