Middle East’s wealthiest say economy will get worse before it gets better

Business conditions improved in August, hitting a record high according to the latest reading from the Emirates NDB Dubai Economy Tracker. Sarah Dea / The National

Almost half of the region’s richest individuals predict that the global economy will get worse before it gets better, according to a new survey.

The survey of the region’s high net worth individuals (HNWIs) by Dubai’s Emirates Investment Bank (EIBank), found that 47 per cent believed that the global eco­nomic situation is getting worse. Just 14 per cent believe that the situation is improving.

A year earlier 29 per cent predicted a worsening environment.

“With the global economy currently going through a period of significant volatility and with depressed oil prices, it comes as no surprise that this year’s report is more sombre than in previous years,” said Khaled Sifri, EI­Bank’s chief executive.

In the GCC region, about 36 per cent of HNWIs expect the economic situation to get worse – a fourfold increase on the 9 per cent of respondents who held that view a year earlier.

Economic growth is expected to slow this year to 2.7 per cent across the GCC, compared with 3.2 per cent last year, according to the IMF.

The UAE’s economy is viewed most favourably within the region, with 58 per cent of survey respondents believing that the economy is improving, while just 23 per cent believe the economic situation is deteriorating.

Pessimism is most concen­trated in Oman, where two- thirds [67 per cent] of respondents believe the economic situation is worsening.

“Confidence in markets such as the UAE and Qatar remains very strong and, when taking a longer-term view, HNWIs say they are optimistic about the Gulf region as a whole,” said Mr Sifri.

Of the 100 individuals interviewed, 77 per cent described themselves somewhat or very optimistic about prospects for the global economy over the coming five years, with 83 per cent hopeful about the region’s economic prospects over the same period.

HNWIs have been shifting funds to safer asset classes.

Average wealth allocations to gold and precious metals have nearly doubled to 9 per cent so far this year, compared with 5 per cent last year, with cash deposits increasing to 24 per cent from 17 per cent.

But while investors expressed grave concerns over falling oil prices and the wider geopolitical situation within the Middle East, changes in allocation were relatively marginal, said Mr Sifri.

“People feel they need to be a little bit more conservative, due to concerns about the economic environment,” he said.

“But in spite of the fall in oil prices and the geopolitical situation, the majority of [HNWIs] don’t really take these matters into account when making decisions about their investments, which is a bit contradictory.”

And despite concerns about the regional economy, Middle East HNWIs remain home birds, with 76 per cent saying they prefer to keep their assets closer to home, in line with the long-term development of asset management functions within the region.

“If you go back far enough you would have seen the majority of wealthy individuals from this region would book their assets overseas,” said Mr Sifri.

“Over time they started seeing more opportunities locally as the local environment became more capable of absorbing such investment and producing the kind of returns they expected.

“In the past decade, people started losing confidence in their ability to control and influence where they place their funds if they send them away from home.”​

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