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Economic tectonics, financial crises & the new Middle East

Tuesday 13 July 2010 - by Dr Nasser Saidi

 In the second of a series of articles on the Middle East, Dubai International Financial Centre Authority chief economist Dr Nasser Saidi says that a new world order is required with the West no longer being the centre of the economic world

The countries of the Middle East accustomed to living in a volatile regional environment are facing the additional challenge of adapting to the emergence of a new world order resulting from a new global economic geography.

The forces at work are momentous and will not be denied: they require structural adjustments in policies and orientations of the economies, societies and politics of the wider Middle East.

Starting with the Asian crisis and heralded by the dot.com crisis, it is clear that a fundamental, structural shift in the geography of the global economy is underway – a shift that is reinforced by the current “Great Recession”.

In 30 years, the geographic epicentre of the global economy has shifted from the mid-Atlantic between London and New York to a point somewhere between Dubai and Shanghai.

Today Asia and the Middle East account for more than 40 per cent of the value of world output at purchasing power parity rates (PPP), while the US and Europe each account for 20 per cent.



By 2013, the International Monetary Fund estimates that the total GDP of emerging and developing economies, at PPP rates, would overtake that of advanced countries for the first time since the late nineteenth century.

Emerging economies will account for 50.6 per cent of global GDP versus 49.4 per cent for advanced countries.

In fact, since 2000, emerging market economies (EMEs) have been the drivers of global economic growth, accounting for two thirds of global economic growth over the past eight years and more than 80 per cent of the budding recovery in global economic growth in 2009.

EMEs are also altering and dominating world trade patterns and trends. The growth of world trade is largely due to the EMEs and increasingly it is intra-EME trade. In particular, China’s trade pattern is shifting towards Asia and the Middle East, leading to increased regional economic integration.

Current account balances of EMEs, which were chronically in deficit during the 1990s, have swung into surplus, and are projected to remain that way, while developed economies look set to fall into even deeper current account deficits through, at least, 2011. By the end of 2010, EMEs would have accumulated in excess of €3.2tn ($4tn) in international reserves, implying growing power in international financial markets.


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