'Worst is over' for GCC economy

Panelists discuss the dynamics of the global commodities market at the Fourth Global Commodity Outlook Conference in Dubai on Sunday.

The worst part is over for the GCC as the macro-economic dynamics have changed and local economies have adapted, according to experts at the Fourth Global Commodity Outlook Conference in Dubai.

"The UAE and Bahrain have stabilised their finances; however, Saudi Arabia is the country that may see some issues. The implementation of VAT [value added tax] in January 2018 will boost short-term growth, but it cannot be relied on as the extra revenue source. Governments still need to diversify and spend on infrastructure," said Dr Nawazish Mizra, associate professor of finance, SP Jain School of Global Management.

Robin Mills, CEO of Qamar Energy, said Opec compliance has been good so far, but it will get harder as the end date (six months) of the agreement nears.

"Markets have recovered quickly and banks have kept the tap open. Currently, the focus is mainly on Permian Basin; if prices go up and shale comes back on, there will be limited upside," Mills said at the conference titled 'Changing of the Guard', hosted by Richcomm Global Services and Dubai Multi Commodities Centre (DMCC) in association with Dubai Gold & Commodities Exchange (DGCX) and Thomson Reuters.

Speakers at the event included Omar Khan, director, international offices, Dubai Chamber of Commerce; Sanjeev Dutta, director, DMCC; and Gaurang Desai, CEO of DGCX.

"One of the aims of the cut is to try and reduce stock level, and as such, decrease the forward curve, deterring the shale producers to come back to the market as they can't hedge forward supplies. Impact of geopolitics will play a more crucial role now, especially supply disruption. Without further Opec cut after six months, we will see prices drop a little bit," said Mustafa Ansari, analyst - energy research at Arab Petroleum Investments Corporation.

Paresh Kotecha, managing director of Richcomm Global Services, said with the background of President Trump's election and a challenging year with elections in the European Union, global commodity markets will experience unprecedented uncertainty and volatility.

"The erosion of trade pacts from Nafta to TPP [North-American Free Trade Agreement and Trans Pacific Partnership] and, possibly, even the EU; as well as rising inflation, low interest rates, strong dollar and infrastructure spending, will generate tensions between incumbent countries," said Kotecha.

The event hosted five panel sessions discussing the outlook on the macro economy, energy, agriculture, base and precious metals, as well as the role of blockchain technology in the commodity market.

"We are currently in a transitional period. Markets were optimistic since Trump's win in November 2016. Nonetheless, since Trump's inauguration, markets have backed off," said Erik Norland, executive director of economics, CME Group.

He said doubts are creeping in on whether Trump's agenda can be undertaken. "Questions regarding advocacy and ideological differences are two reasons why this may be tougher for Trump than he first thought," said Norland.

- issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com