Is the Worst Behind Us?

G7 vowed to take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding after world’s stock markets crumbled and recorded their worst weekly declines. The plan also envisages that banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.

At home, the UAE federal government moved swiftly ahead with its own plan and has now added a whopping Dh70 billion funding facility on top of a Dh50 billion central bank emergency fund. The government has already announced a blanket guarantee to bank deposits and to protect banks from credit risks in an attempt to stave off the effects of global crisis.

Measures taken and the determination shown by leading governments to ensure that world’s financial system does not meltdown completely, have been, generally, well received in the financial centers as reflected by a sudden turnaround of stock markets with US, European and Asian markets recording healthy gains in the past couple of days. Dubai market has risen over 20 per cent in the past two sessions, reflecting that investors’ sentiment is being restored.

But does that mean the global financial crisis is behind us? Not yet and not entirely. Injection of billions of dollars of national wealth will prevent further bank failures, liquidity situation will ease and the markets will tend to show some signs of stability. But this crisis is going to haunt the world for months, may be years. The world will continue to see the repercussions of this crisis. The next phase seems to be a slowdown in global economic growth, which will have its own victims. If measures announced by world leaders, last week, are not implemented in their totality, a gruesome world recession may soon follow. So, is worst over? Not entirely, not yet.