Top Arab banker warns of fresh global crisis

A decline in exports could jolt the economies of China and India and trigger a fresh global fiscal crisis within the next four years, a top Arab banker has warned.

Adnan Youssef, Chairman of the Beirut-based Union of Arab Banks (UAB), said the new crisis could hit the US bond market most but would have a limited impact on the economic and financial sector in the Arab World.

Writing in the UAB's monthly magazine, Yousef said that despite such an expected little effect, Arab nations should not be complacent and must push ahead with financial reforms, mainly in their banking sector.

He said the Arab region had forced its way out of the clutches of the 2008 global economic turmoil while it has not been severely effected by the euro zone crisis.

"But has the crisis receded completely? Not really, for the world is likely to see a new crisis in the next three to four years. It will be sparked in China and India and its greatest impact will be on the US bond market," he said.

"This is because of the increased dependence on investment tools that are focused on debt and its use to finance economic activity – perhaps the major global financial crisis has nearly ended but what enhances the possibility of a new crisis in China and India is the decrease in their exports."

Youssef, a Bahraini, said he expects the new crisis to be a "short-term one" and far less severe than the 2008 distress. "This is because neither country [China or India] has major external debt. This will play a key role in easing the impact and duration of the crisis."

Youssef said: "In this respect, we, Arabs, and the whole world should not turn a blind eye to such a probability and say that China and India are developing in a good and right way and are completely safe. As for the euro crisis, it has no major impact on the Arab banks since Greece has no direct banking investment links with most Arab countries. Hence, the crisis has hit countries with close links to the European Union."

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