GCC remains resilient in the face of global crisis - Money - Zawya

Even though the economic environment in the GCC (Gulf Cooperation Council) region has continued to improve steadily in the course of the summer, the increasingly alarming global backdrop is fueling risk aversion and reviving fears of a relapse in the global crisis. As the euro zone continues to stumble from one inconclusive exercise in crisis management to the next, the situation in the US has taken a turn for the worse with increasingly weak economic data, a political stalemate, and a consequent decision by Standard & Poor's in August to downgrade the country. The GCC remains vulnerable to these risks because of renewed worries about oil demand erosion as well as heightened risk aversion in financial markets. This has created a paradoxical situation where the regional growth drivers in the GCC are strong but the effects of the global uncertainty on investor sentiment once again risks leaving growth disproportionately dependent on the public sector, the National Commercial Bank (NCB) has said in its GCC Economic Review.

The European situation has taken a significant turn for the worse as a result of mounting concerns about the ability of the European Financial Stability Facility (EFSF) with its current resources to address the stress points in the euro zone economy.

Efforts are underway to increase the capital of the facility from $440 million to $780 million but the ratification process is still to be completed. In the meantime, the European Central Bank (ECB) has taken a more active role in crisis management.

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