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A weaker USD could spell good news for Dubai’s economy -EFG’s Shams El Din: As economists, analysts, investors, and portfolio and fund managers everywhere digest how the US’ new tariff regime and the ensuing global market turmoil will trickle down to countries here in the region, we sat down with EFG Hermes’ Head of Research Ahmed Shams El Din to give us his take on what might happen next.
The UAE is among the most well-positioned countries in the region in terms of weathering the crisis, Shams El Din told us on the sidelines of EFG Hermes’ annual One on One in Dubai. The Dubai economy, specifically, is much stronger in terms of regulation and diversification of the economy [than in previous crises], he added.
Dubai is not exposed to oil prices, he explained. The breakeven price for oil is around late USD 50s or early USD 60s, so the funding and fiscal side will remain resilient, he said. This means the UAE’s current and fiscal accounts are well-buffered, and the liquidity side is much stronger than in Saudi Arabia.
It is, however, among the most exposed to emerging market cycles. “If the USD really depreciates, this will give a boost to the Dubai economy,” he added.
What about Abu Dhabi? Abu Dhabi is working on restructuring its top-down financing model, and what we’re seeing with sovereign and quasi-sovereign entities is very positive, Shams El Din noted. The focus for the capital should now be on how to ensure that positivity and the increasingly important financial sector can reflect on equity, debt, and capital markets, he added.
THE BIGGER PICTURE-
Volatility is the name of the game for the foreseeable future: What we’ve learned from working in capital markets for years is markets are always correlated on the downside. What's happening will definitely reflect negatively on regional markets as we're seeing today [...] unless they reach a very fast resolution on the political side, but the volatility will continue.
The good news is: The region’s fundamentals are stronger this time around than in any previous crisis that we’ve come across, he said. If we’re talking about foreign reserves, the currency peg, and external balances, I think this region will prove to be one of the very few in emerging markets that still offer a lot of opportunities and a much better return on a risk-adjusted basis than others.
