Interpreting Middle East Economic News and Analyzing Market Trends

Archive for April, 2013

Cyprus Update: Capital controls still in place, economy sinking with no end in sight

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It’s been one month since Cyprus reached a deal with the EU, ECB and IMF (collectively known as the Troika).  The bail out was supposed to save the country from a collapse of its financial system and help build up the economy again.  Instead, the bailout/bail-in is a disaster and the country is nearly forgotten as the Troika moves on to prepare for the next bailout victim.

 

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Here’s another sign of the unsustainable welfare system in the GCC

The welfare systems in the GCC are well-known for their generous benefits and subsidies offered to their citizens and expats alike.  In addition to offering a tax-free environment, they offer subsidizes on a wide range of staples including gas and utilities.  For their citizens, they also offer free education through university, free healthcare, subsidized housing (in many cases, free housing or land), a guaranteed public sector job and a generous pension.

 

Citizens of these countries assume this welfare system can go on forever, and expect it to do so.  However, high birth rates over the past few decades are causing severe strain on governments’ budgets.  This cannot go on forever and sooner or later, citizens will have to adjust (it will be painful).  Cracks are already emerging to reveal that this system is unsustainable, albeit small cracks, so governments are working on the painless adjustments first… targeting the expats and having them pay higher rates than citizens.

 

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DFM hits 4-year high outperforming S&P 500 by more than double since the beginning of the year

 

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HSBC mulls Iraq exit as management continues to flip-flop on its strategy

HSBC Bank, which took a hit on its earnings last year to settle allegations of money-laundering in the US, is still trying to stay focused after several poor decisions made over the past decade.  See our earlier posts here and here for details.  Management’s latest strategy move is trying to determine whether or not to stay in Iraq.

  

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Dubai property is hot once again, will history repeat itself?

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It’s 2013, but the photo above would suggest that it’s 2007.  Local media are cheering the return of Dubai’s property market.  Recent off-plan sales at several new developments saw a mad rush of potential buyers line up to buy these yet-to-be-built units.  Police had to be called in at one sale to manage the rowdy crowds.  No sooner were these developments sold out than they started to appear for re-sale on the web.  The proper term here would be ‘flipped’.  The real question should be, is Dubai property back or is speculation back?

 

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