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Ministers see economies growing despite turmoil GCC say turmoil makes monetary union urgent

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  Article Date:
27, 2008



Finance ministers and central bankers from the oil-rich Gulf said on Saturday they expect their economies to continue to grow despite the global financial crisis and a sharp drop in oil prices.

They said they had already taken steps to deal with the impact of the global financial crisis but that turmoil on world markets had given new urgency to their plan for monetary union, AlArabiya TV reported.

The states, preparing for a single currency by an unlikely 2010 deadline, emerged from the meeting with few public statements on how they would work together.

Policymakers meeting in the Saudi capital, Riyadh, "reaffirmed their confidence in the stability" of the financial sector of the six-nation Gulf Cooperation Council (GCC), they said in a statement issued at the end of the meeting.

The officials underscored the "strength and solvency" of the financial sector in the Arab states of the Gulf and stressed they can weather any impact from the global financial crisis, the statement said.

Participants in the meeting "expect Gulf economies to continue to grow by good levels," it added.

They voiced satisfaction over measures taken in the region to deal with any impact from the world economic crisis and expressed readiness to take any additional measures, the statement said.

The main aim for Saturday's GCC meeting was to discuss coordination of their response to the global downturn that threatens to brake their region's six-year economic boom.

"The likely effects of the global crisis we can deal with through the measures we have already taken," Qatari Minister of Finance Youssef Kamal said after the meeting.

"The crisis proves how much we need a single currency and that a single central bank should be a supervisory body."

The agenda for the one-day meeting included discussion of new steps to shore up confidence in their banking sectors while reviewing regional investment plans.

AlArabiya television reported that Gulf policymakers would discuss directing more government funds into stocks and bank accounts to bolster confidence.

Saudi Arabia, the United Arab Emirates and four other Gulf states have so far adopted separate policy responses to defrost interbank lending and boost confidence in their stock markets. The GCC also includes Qatar, Kuwait, Bahrain and Oman.

Some Gulf states have guaranteed bank deposits, eased lending restrictions, set up emergency funding facilities for their banks and invested money in ailing stocks.

The global turmoil has hit the Gulf region after six years of high oil prices allowed state and private investors to funnel billions of dollars into industry and infrastructure projects.

Banks are now struggling to finance these projects, leading economists and policymakers to expect project delays and forecast lower real growth as the Organization of the Petroleum Exporting Countries (OPEC) cuts crude oil output.

Crude prices have dropped by more than half since hitting record levels above $147 a barrel in July, including a fall of almost $4 on Friday despite an agreement by OPEC to cut output by 1.5 million barrels a day.

Investor confidence in the region has already taken a hit. Saudi Arabia's bourse plunged more than 8 percent on Saturday, having dropped more than 44 percent this year.

Stock markets in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates have taken a severe battering this month, losing some 200 billion dollars.

Fears of a liquidity shortfall have also loomed over Gulf banks because of the global credit crunch, with the banks having limited ability to borrow on the international market.

Source: RIYADH (AlArabiya.net, Agencies)