Details

GCC States in Good Position to Stand Ground Against Trump’s Protective Economic Measures

The region’s economy is diversified enough to maintain a competitive edge

Gulf countries are required to review local and foreign investment strategies

The Gulf property market has been beset with several challenges for a long period of time. However, despite the fast-paced and multi-faceted changes and economic developments occurring at all levels, the sector has managed to survive these challenges by adopting a series of effective measures. Economic diversification, modifying investment project launch and execution schedules, and changing types of investment from individual-domestic ones to institutional global investments are among the measures that have been taken to mitigate the increasingly high risks to cope with the developments in the region. Maintaining the competitive edge of the current and future medium and long-term investments by integrating political impact into investment strategies are among the approaches adopted to face challenges.

In its weekly real estate report, Al Mazaya Holding stated that the political affiliations of the new US President Donald Trump will have their own bearing on American investments, locally and internationally. His new policy will have an infinite impact on the economies of the Gulf region, especially those measures relevant to the energy sector. Trump’s plans are likely to create more challenges to be suffered by the major economic sectors in the region, mainly the real estate platform, which is directly affected by government spending strategies.

In this regard, the report highlighted the US president’s statements regarding his plans to streamline the permitting process for all energy companies. The report also underlined other statements related to his intention to revive the U.S. coal industry, boost  US oil and gas production, and establish a pipeline network to import about 830,000 bod from Canada, a development which is likely to put more pressure on oil prices in an already suffering industry.

The report referred to the potential impact of unstable US capital markets and US dollar on Arab investments in the US. Saudi investments in US markets are estimated at $ 7500 billion, with the trade exchange between the two countries amounting to around $ 65 billion by the end of 2015. Saudi Arabia issued up to 317 licenses for US companies to launch $52 billion worth of investments, a fact which indicates that any political or economic decisions that do not carefully consider the requirements and interests of both parties would jeopardize the two countries’ economies.

The report warned that the new US Administration’s tendency to take unilateral protective measures without consulting their European partners would destabilize the world economy. Several countries had pinned hopes on the year 2017 for economic recovery, yet it has become crystal clear that the US Administration is displaying a tendency to unilaterally usurp all investment opportunities, leaving other economic blocs all over the world in the lurch and unable to recover or gain any ground.

The report states that the current US Administration is going for more tax deductions, which has forced several companies to leave the US market. In addition, the new US president is said to be planning for a lower US dollar to make US products more competitive, not to mention other US plans to further dominate the ranks of global consumers’ favorites. The report noted that the Gulf aviation sector would likewise be affected by the new US policies, with US air carriers attempting to appeal to Trump for protection against foreign competition, mainly coming from the three core Gulf airlines: Emirates, Qatar and Etihad. These airlines’ successes over the past years have prompted hostility from US and European carriers.

The report highlighted the speculations and discrepancy in forecasts with regards to the future of the Gulf realty markets owing to the state of unsteadiness suffered by local and international markets. Trump’s stimulus plans could prompt the US to rapidly hike interest rates, which would reflect negatively on mortgage interest rates, and consequently lead to more shrinkage on property markets which are already sustaining myriad pressures in sales and rental transactions.

Conclusion

The report said the GCC states are still in a good position that enables them to stand ground vis-à-vis the new US Administration’s policies by virtue of the diversification policy and the medium and long-term plans that have been adopted. The report referred to the sovereignty funds and the trade surpluses boasted by the GCC states as a resilience factor enjoyed by the Gulf region. The GCC states, however, are required to review all the financial, economic and political decisions taken and to adopt a robust approach toward the new US investment strategy, while reconsidering the current investment plans in light of the potential changes that might be introduced to the capital markets over the coming period.