Posted by: dubaibizniz | May 13, 2008

IMF says it’s all good.. but is it?

IMF LogoThe IMF says the Gulf is looking good:

The International Monetary Fund has issued an upbeat outlook for economic growth across the Middle East and central Asia, saying that high prices for oil was likely to insulate the region from the broader global economic downturn and keep money flowing into new industries and poorer economies.

They are also telling the Gulf states to tough out the current 2-digit inflation rate for the next couple years (optimistic guys, aren’t they?). I never considered the IMF to be a purely financial institute and always saw them as a political instrument. Putting up with 2-digit inflation is just absolutely ridiculous as it harms the economy in more ways than I can count.

So, why are the Gulf leaders still not listening to the experts and instead heeding the politically influenced advices? Could it be that the politics of the peg have such a dramatic impact on the economy that economists simply are unable to quantify? Perhaps.

Currently, what is happening is very simple. Costs are spiraling out of control. Small businesses are barely coping with operating costs. The number of start-ups are decreasing as the number of companies folding increases. Employees are jumping ship to ‘re-peg’ their salaries. So, good talent is moving away from small innovative companies to bigger ones. This puts further strain on smaller companies to innovate in order to compete with the bigger more established organizations.

So, Mr. IMF, I strongly disagree with you. Given the current economic environment, I would most certainly not take the risk and start a new company. I would not be able to afford the rent, the Internet (AKA extortion) and the salaries. Simply put, it would be suicidal. So, is that what you would call a good outlook?

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Responses

  1. Totally agree: My numbers say UAE/DXB is far from lucrative for acquisitions, start ups. The costs remain ridiculously high compared to possible returns. How could the government not see what is going on?

  2. The too-powerful IMF have been all over the GCC countries for some time – especially in the areas of VAT and personal taxation introductions.

    Unfortunately the pressure seems to be fueled other countries that harbour professional jealousies towards tax-free countries.

    A lot of countries are just itching to have reciprocal taxation agreements with GCC countries so that they finally have legal ways to audit their citizens who are living and working in the tax havens.

    Tall Poppy Syndrome – go after the people who seemingly have it all and cut them down to size.


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