The Effects of the 2008 Financial Crisis on the Investment in the Gulf Area – Essay Example
The 2008 financial crisis brought in its wake the reduced inflow of foreign direct investment (FDI) with a measure reduction observed in 2009. As per the Kuwait newspaper, Al-Qabas, as many as 675 real estate projects were cancelled in Gulf countries with almost 75 percent of them belonged to UAE â€“ a large portion being in Dubai. Dubai’s real estate market has been highly buoyant since last couple of years and almost 25 percent of its GDP comes through its real estate industry. It is imperative that property market in Dubai has seen its worst fall during the crisis period. In the aftermath of 2008 financial crisis, Oil prices plummeted significantly to reach $40 per barrel by December 2008. The countries under discussion heavily depend upon the income from exports of crude oil and their 50% of GDP, baring UAE, is generated from the oil economy. It is not surprising that fall in oil prices affected significantly the business of oil exporting countries such as Kuwait, Qatar, Oman, Bahrain, UAE causing impact on investment scenarios in these countries.
Impact of 2008 Financial Crisis on Investments in Qatar
It is pertinent to note that the impact of financial crisis on Qatar has not been substantial. During the 2008 financial crisis, the establishment continued to protect the local banking sector through direct investments in them. Ongoing financial Crisis did affect the GDP and investments in 2009 but it made a smart recovery in 2010 due to upward movement in oil prices. Qatar made substantial investments in its gas sector in 2011. The policy makers focused on country’s non-associated natural gas reserves and began developing them that provided huge boost to foreign investment in non-energy sectors too. Oil and gas still accounts for over 50% of the nationâ€™s GDP generating 85% of export earnings. It will be most appropriate to note that Qatar’s per capita income is highest in the world and the country boasts of one of the lowest unemployment rate. GDP real growth rates in Qatar have been 16.7%, 13% and 6.6% during the years 2010, 2011 and 2012 respectively that amply proves that the impact of 2008 financial crisis on Qatar has not been significant. As per the 2012 estimate, the gross fixed investment in the Qatar economy has been to the tune of 30.6% of GDP that is certainly laudable in the ongoing financial crisis. Direct foreign investment in Qatar has been registered at $31.84 billion and $32.17 billion during the years 2011 and 2012 respectively and Qatari Rials (QAR) exchange at a fairly constant rate of 3.64 per US dollar all from 2008 through 2012 (Qatar Economy Profile, 2013). Doha Subsea Tunnel with an investment outlay of US $1 billion, Doha Metro with total investment of US $2 billion, and New Doha Port with the projected investment outlay of USD 6.84 billion are some of the projects conceptualized after 2008 financial crisis are in the fast mode of implementation and likely to be completed in the next 2-3 years. The impact of 2008 financial crisis is nonexistent in Qatar and that can also be gauged from the fact that the foreign direct investment (FDI) in Qatar in 2009 was USD 8.7 billion; it was higher by USD 2 billion when compared with the investment figure of 2008. It is important to note that between 1990 and 2000, the average FDI investment in Qatar has been only USD 169 million (Rise with Qatar, 2012). Impact of 2008 Financial Crisis in Investments in Kuwait Kuwait is also an oil economy and petroleum products contribute almost half of its GDP and earn almost 95% of its export revenues.