Economic recovery of the Middle Eastern countries is dependent on growth in the Europe and the US eco?nomies despite the fact that the region accumulated huge a current account surplus over the last few years, economists said.
Predicting a "mild recovery" worldwide, Anton Brender, Chief Economist of Dexia Asset Management, said oil prices and financial channels remain the key variables that would determine the region's growth.
He said growth in the US and more particularly in Asia is critical from where a major demand for commodities and oil comes.
Brende said $80 (Dh293.64) per barrel oil price is critical in order to maintain current account surpluses, adding that the region might not be able to post surplus with oil prices at $50 per barrel.
Florence Pisani, Economist at Dexia Asset Management, said recovery in the next few years would be mild and traditional mechanisms of recovery would not work.
"There are tentative signs that things are getting a bit better. The shape of recovery will depend on asset price behaviour because housing market in the US has been hit badly and also as there is no excess capacity utilisation rates. Firms have no incentive to invest as capacity utilisation rates are very low," said Pisani.
Chief economist Brender said the shock of crisis transmitted from countries with a credit deficit to those with surpluses and it has been very deep.
"The only part of the world that was not relying on Western financial system was Asia particularly China. We are rather confident in capacity of China as it has all the required amount of liquidity. China has a good control of its domestic economy," he said.
Brender said local budgets of governments have been playing a huge stabilising role.
Brender ruled out any fear of risk to the regional economies.
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