Economic growth prospects for the GCC remain "extremely bullish" due to an influx of global capital and talent, despite challenges posed by the Israel-Gaza war, senior executives of two major global banks said.
The Gulf, and particularly the UAE, has become a key hub for businesses as the region continues to demonstrate resilience amid the Gaza conflict and global economic challenges, the executives said at the World Governments Summit in Dubai on Monday.
The comments come after the International Monetary Fund last month cut its growth forecast for the Middle East and North Africa due to the war. The Washington-based fund projected Mena economies to expand by 2.9 per cent in 2024, down from an October forecast of 3.4 per cent.
The fund also revised down overall growth forecast for the GCC to 0.5 per cent in 2023, one percentage point lower than its October estimate, but the economy of the six-member bloc is expected to rebound to 2.7 per cent in 2024.
"Whenever I hear these IMF-type figures, it doesn’t resonate with what I see on the ground because there’s just tremendous growth [in the GCC], with obviously huge increases in population and economic activity," Bill Winters, chief executive of Standard Chartered, said in a panel discussion.
"This is an extremely bullish environment despite the fact that there’s a war in the neighbourhood. The Gulf is a sanctuary for global capital and people – and that was clear during [and after] Covid, given the influx of business and the people coming with it."
The global economy, meanwhile, is set for a “soft landing” and interest rates in the world’s major economies, including the US, are likely to ease by the middle of 2024, IMF managing director Kristalina Georgieva said at the summit.
“We are very confident that the world economy is now poised for this soft landing that we have been dreaming for … we are coming there," she said.
Ms Georgieva emphasised the direct effect of the Gaza war on the Palestinian economy. The economy of the besieged enclave shrank by 80 per cent, while the economy in the occupied West Bank declined 22 per cent, as the conflict rages on.
A prolonged war could have spillover effects on the wider global economies, Ms Georgieva said, pointing to the impact of attacks by Yemen's Houthi rebels on shipping in the Red Sea.
“I fear most the longevity of the conflict because [as] it goes on an on, the risk of spillovers go up," she said.
“If there are other unintended consequences in terms of where the fighting goes, then it becomes much more problematic for the world as a whole."
Meanwhile, Mr Winters said he expected the GCC, anchored by Dubai, to use its position as a gateway for trade and a hub for finance.
"We’re extremely positive in the region. We see an interconnection – and it’s particular to Dubai, but it extends across the Gulf – a connection as a trading and money hub for everything East-West, a lot of things North-South, with a meaningful component of trade going through the US, Europe and the Americas," he said.
"This connector role for Dubai and the UAE [comes] at a time when trade flows are changing fundamentally, where South Asia and Middle East trade, including China, become so critically important."
He noted that the UAE was now one of London-based Standard Chartered's top three markets, which include Singapore and Hong Kong.
Dubai is "impressive" given it has not relied on a huge wealth of natural resources, but has always "attracted terrific human capital to leverage on the strengths that it has", said Bernard Mensah, president for international at Bank of America.
"What has been really impressive post-Covid has been the crowding in of more of this talent ... the abilities come in and find solutions for idea, capital, venture fund, start-ups and growth capital," he said.
"The region has taken a step up partly because it’s grown and it’s crowded in more people from more places around the world."
From a global perspective, both executives acknowledged the banking industry was dealing with tail risks, or those occurring generally due to a rare event – in this case, the Israel's war in Gaza.
"If you visited our risk committee [meeting] and listened for an hour ... it just feels terrible. All the things that could go wrong are there," Mr Winters said.
However, lenders "are finding a way to enjoy the broadly favourable business environment and prepare for these risks but never to forget the level of human suffering that’s going on", he said.
Despite the overall environment being positive, the tail risks pose challenges, Mr Mensah said.
"There are incredibly intense disruptions that are going on around the world that we need to be sensitive to. The closer you are to those, the more traumatic it is," he said.
"Each of those situations can spill over quite easily. But within that, there’s some tremendous opportunities because the world has been pivoting coming through geopolitics, Covid, a long period of zero interest rates and the sustainability agenda."