By By Samia Badih, Staff Reporter

Dubai: The GCC economies are on the path to recovery in 2010, which would be driven by the hydrocarbon sector, according to Emirates NBD. The bank forecasts a return to growth in 2011.

Burj Khalifa
Burj Khalifa

“Our general sense about growth both regionally and in terms of the global economy is that we are going to see a recovery in 2010,” Tim Fox, chief economist at Emirates NBD told a press conference yesterday. “But it’s probably still somewhere short of the trend in growth rates that we’ve seen across the region in 2008 and 2007.”

“Since the turn of the year and the opening of the Burj Khalifa, we have started to see people want to come back and talk to the bank about making investments outside the cash deposit,” said Gary Dugan, chief investment officer, Private Banking, at Emirates NBD. “It’s hundreds of millions of dollars being put on the table. It’s real money that is coming back in.”

Dugan said risk appetite is also improving as more clients have shown interest in the past couple of months in the real estate sector.

“[The risk appetite] was better, but I think it is being rebuilt and we can be at a better place in the coming months.”

As the emerging world will provide much of the growth, the bank’s clients need to keep a balance of assets in their portfolios, Dugan said. “Because the days of earning 20 or 25 per cent in asset classes such as property and equities are very much behind us,” he said.

Highlighting oil’s big role in the recovery, Dugan said that prices will strengthen the economy in the short term. “Demand for oil is improving,” he said, “and we are already seeing Chinese demand rising above its previous cyclical peak. We believe that longer-term increases in the intensity of energy use in India and China will meet limited supply, leading to higher prices.

“This region does very well when oil prices go up,” he said. “Increasing oil prices will continue to be fundamental to regional recovery in the short term, with non-energy sectors drawing on demand from outside the region and continuing strong energy prices.”

The developed world will witness cautious economic growth, Fox said. “In the United States, we are more and more confident about growth and we think growth will reach 2.5 per cent,” he said.

“We’re past the worst point in terms of the local economy which was the fourth quarter of last year,” said Dugan. “The worst should be behind us.”