Recession in Gulf states would have dire consequences for Lebanon - expertsSlowdown in oil-rich economies could lead to fewer remittances
Participants in an economic conference in Beirut warned on Wednesday that Lebanon will be gravely affected if the oil-rich Arab Gulf states experience a recession. Speaking to dozens of participants, Mohammad Zaatari, the president of the Chamber of Commerce in Lebanon, said that Lebanon and some of the Arab countries had managed to avoid the effects of the global credit crunch thanks to the measures adopted by the central banks in these countries.
"There is do doubt that Lebanon will be among the countries that will be affected by any economic slowdown in the Gulf states," Zaatari said.
He urged Arab states to take more measures to ensure the immunity of Arab markets.
More than 400,000 Lebanese currently work in the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain. It is estimated that Lebanese expatriates send close to $6 billion to Lebanon each year, or 25 percent of the country's GDP.
This massive cash injection has contributed to economic growth and an increased demand for properties.
Central Bank chief Riad Salameh said recently that Lebanon can cope with a small drop in remittances because the government has agreed to raise minimum wages by LL200,000. He added that this step would boost consumer spending.
Zaatari said Lebanese banks and financial institutions are very liquid due to the steady flow of deposits from Lebanese expatriates and Gulf nationals.
Some of the participants stressed that most economic sectors, including industry and agriculture, have not prospered or grown despite the inflow of capital. They added that many companies are unable to make ends meet and this situation could get worse if the global financial crisis reaches some of the Arab countries.
Zaatari acknowledged that economists have noted signs of an economic slowdown in the oil-rich states. "Falling oil prices and the huge drop in the volume and value of trading in most Arab bourses are serious indications. We have to act now before this crisis spills over to other sectors of the economy and real estate is one them," Zaatari said.
He added that the global crisis should provide incentive to the Arab countries to speed up the creation of a free-trade zone in the Middle East.
Ahmad Jouaili, the secretary general of the Arab Economic Council, described the crisis as an earthquake.
"No one knows for sure the strength of this earthquake because the crisis has just started. If this earthquake hits nine or 10 on the Richter scale then most countries in the world will be in great risk," Jouaili said.
He added that the upcoming Arab economic summit that will be held in Kuwait next month would address these issues.
Organizers of the summit, which is expected to draw thousands of participants, including heads of Arab states, say that it will be the biggest economic and financial conference ever held in the
Middle East. - The Daily Star
