Slamming the brakes on the Gulf's Growth

As the Arab "Boom Years" draw to a close, we now see events over the last 4-5 years (for example, the Arab Spring) form as a catalyst for the recent Oil price decline... Almost 50% from this time last year.

Simultaneous challenges of the threats from ISIS, political transitions &  falling Oil prices have remained extremely prevalent in 2015 and more so impacting the Oil rich states of North Africa over the Middle-East.

Slamming the brakes on the Gulf's Growth 

As Political turmoil spreads, the jihadi threats hover over Syria, Iraq & more recently producing itself in the conflicts around Libya's oil fields, as well as recent violence in Tunisia (post-Arab spring transitions).

The recent weeks headlines have been focused around Yemen and the coalition of Sunni Islamic states prodding their Gold feet over the Pan-Arabian Muslims - attempting to constrain an unwanted addition of rival Iran.

Libya, once Africa's richest nations is now on the verge of Bankruptcy.. being named "The New Somalia", as their new Government warns of an "Oil Production Shutdown" given the ongoing threats from ISIS and their "Black-Market" demands.  No-one could of imagined in Post-Gaddafi Libya that their nations Energy sector would be so badly affected.

Economic Impacts

Since the recent Egyptian revolution in 2011, Egypt's credit rating fell 6 points... Tunisia, since it's revolution has declined 4 points...  Egypt has been under the spotlight since 2011 as Ibrahim Mahlab's party seeks stability & attempts to gain against it's economic shortfalls.

These Gulf states were somewhat supported by years of $100+ oil prices, as well as donations from other powering Arab nations (For example, UAE donating almost $20bn to Egypt + a further $12bn from Saudi & Kuwait... for aid & "investment")

Egypt, in particular is viewed as pivotal in bridging the gap between the Middle-East & the North African states... as the UAE's Minister of State quotes "Egypt is central to the prosperity of the Middle-East" . However, the fall in Oil prices provokes pressures and furthermore, an instant-stimulus for these struggling economies.

Private Investor's eyes 

Most Foreign Investor's are burdened by the risks of domestic unrest and in attempting to control the "social peace", economic reforms to boost investment & reduce subsidies could be expected.. The overall thought is that the plunging Government revenues will surely filter into the real economy and the Growth forecasts become largely cloudy.

Already, real estate prices in the once BOOMING Dubai are now largely reducing and empty skyscrapers now account for 25% of Dubai's population. More-over, core infrastructure projects around the Gulf will be haltered, for example new Transport lines... at least until the Oil market stabilizes... if that.

With $20 Oil on the horizon.... Will these Economies Survive? 

DEMOLISHING THE EURO CURRENCY

Dear Readers

Hope you all had an amazing weekend.

As talks progress with Brussels, Frankfurt & Athens... The Greek economy is presented with now 2 options :

- Leave the Euro, defaulting on it's debt & starting again with the Drachma;

OR

- Find a new "bailout" agreement from the ECB (heavily supported by German Euros) & continue operating with their high level of debts.

If Greece do leave the Euro, The markets will ask who is next?  As this event could create a cascade of defaults across the EU. Spain, Ireland, Portugal or even Italy... Causing mass scale crashes in the EU banking systems - possibly bankrupting Governments.

In reality... will the ECB let this happen?.... Maybe so....

Draghi reduced interest rates back in 2012 to prevent this very occurrence. However, Unemployment rates still remain at peaks greater than the recession.. Spain at 24%, Greece 26%, France 10.5%... To me this is not a Crisis but verging onto a depression..

Looking at the EU as a whole... many economic disparities are noticeable... For example, Ireland's main trading partners are the UK & the USA... Vs. Finland's main trading partner being Sweden. The formation of the Euro was based on a Political foundation rather than an Economic one.

This structural formation of the Eurozone has been the main creator of the issues faced within the EU. Outsourcing ones monetary policies to Brussels have left countries like Ireland, Portugal, Greece & Spain totally incapable of controlling their economies & promoting internal recoveries.... Then what happens? ... FDI drops... Foreign Investors start pulling out their money and start investing in developing nations, where yields over time are more promising.

Just today, Norway's biggest hedge fund announced a new tranche of investment into South Asian property.

Ladies & Gentlemen - we have now a Currency crisis.

For years now, Frankfurt & Brussels have been trying to counter-act this by currency devaluation in certain countries - so you have lower wages & internal devaluations - but the countries debt is still priced the same.

What happens now?

Theoretically, Greece can escape their debt burden... A possible sequence :
1. They default on all their debts;
2. Forces Greek banks to buy Greek bonds;
3. It has Greek banks sell their bonds back to the ECB - therefore putting the ECB in line for paying back Greek debt...

If the ECB agrees to this, it means the Greeks have escaped their debt burdens..

But why would the ECB buy Greek debt?

Would it not be economically cheaper for them to #Grexit?

More fiscal support is not supported by the Northern EU nations....

Keep it fresh guys

- Peace & Love
Anish