RIAYDH, SAUDI ARABIA — Gulf Arab finance ministers said today that strict monetary oversight has protected their nations from the global financial crisis and voiced confidence in their continued ability to stave off the meltdown that has hammered world markets.
The ministers, representing the six oil-rich nations of the Gulf Cooperation Council, met in the Saudi capital of Riyadh to take stock of the impact of the financial crisis. The meeting came amid clear investor concerns despite repeated government assurances about abundant liquidity in the financial sector.
The hastily convened meeting was also ostensibly aimed at determining if more coordinated measures were needed to buffer their respective economies. The GCC includes Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.
The statement issued by the ministers and the governors of their respective central banks said Gulf banks enjoy a “high degree” of liquidity and that government agencies will continue to monitor developments in the financial crisis.
The ministers “underlined their confidence in the stability of the monetary system in their countries” and the strength of their economies. “It is expected that the economies of the GCC countries will continue to grow by good averages.” Following the meeting, Qatar’s finance minister, Youssef Hussein Kamal, told reporters that Gulf countries have “proved to the world that our laws and strict oversight are what saved us from the crisis the world is in.” “This gives (the world) reassurance to come and invest in our countries,” said Kamal, who added that the crisis will not affect plans by the GCC to set up a single currency by 2010.
But Saudi Finance Minister Ibrahim al-Assaf told the official Saudi Press Agency there were signs of a recession in developing countries that could directly or indirectly impact GCC economies.
“We should all work to avoid the negative effects and reduce their impact on our economies by coordinating policies and measures,” he said.
Several analysts have said the GCC nations are well positioned to weather the brunt of the financial crisis — at least in the short-term — largely because of their massive oil-fueled cash surpluses.
But many of these nations have seen their local stock markets take a beating in tandem with broader global markets. Since January, Saudi Arabia’s benchmark Tadawul index is down by more than 44 percent and the Dubai Financial Market is off 45 percent, according to data from , a Middle East business information Web site.
The region’s traditional cash cow — oil revenue — has also been hard hit as crude prices have fallen by well over 50 percent from their mid-July highs of US$147 per barrel. An Organization of Petroleum Exporting Countries’ emergency meeting on Friday has so far failed to stem the slide in crude prices, despite a decision to cut output by 1.5 million barrels per day.
Heading into today’s meeting, it seemed clear that despite their public assurances, the ministers were also being pragmatic, if only in private.
A draft agenda of the meeting, obtained by reporters on the scene, gave voice to their concerns about a spillover of the financial crisis into the domestic market and discussed ways to protect their economies.
“A retreat in the U.S. economy and the European economy …
will have a negative impact in GCC countries,” said the agenda.
It said foreign investors may be forced to liquidate assets held in Gulf countries to cover positions back home and that the value of Gulf investments overseas “will be subjected to the possibility of a retreat” because of the crisis.
The document also spoke about the psychological impact of the crisis and how “unjustified fears” could lead to a “hysteria” of bank runs in the Gulf.
The agenda suggested GCC countries should increase coordination, encourage inter-GCC investments, re-evaluate their overseas investments and monitor the energy markets.
Also today, U.S. Deputy Treasury Secretary Robert M. Kimmitt held talks with Saudi King Abdullah on the global financial crisis, according to the official Saudi news agency. The report said the meeting in Riyadh focused on efforts to contain the crisis, including the Nov. 15 meeting of world leaders called by U.S. President George W. Bush.
