GCC unlikely to follow EU model for single currency

Haseeb Haider
Filed on February 26, 2008

ABU DHABI Governor Central Bank of the UAE Sultan bin Nasser Al Suweidi yesterday said GCC might not follow the EU economic model for its economic integration, and a monetary union will be established in three phases, culminating in launching a single currency.

The GCC countries might not follow the example of the European Union and the Euro. Implementation of the monetary union will be in stages. "The first and second stages will bring two benefits to GCC economies as it will reduce or eliminate the foreign exchange transaction cost between our country's currencies and will improve the efficiency of capital flows between our economies", he said, while speaking at Abu Dhabi Corporate Leadership Forum. The Governor spoke on GCC economic growth, future potential, economic integration and issues relating to monetary union.

He said that the single currency is a long-term issue of the GCC and it's too early to discuss it, as the regional nations first have to agree on the very foundations, which could be different from the EU model. On GCC economic integration, the governor said that the regional nations will continue to harmonise their laws, especially company laws to make it possible for regional companies to branch-out from present situation, where it is really difficult for them to setup cross-border businesses. "With the GCC Common Market taking shape, the business potential for the regional firms would grow, after they achieve economies of scale and huge market of 42 million people", he added. He hoped that the tax laws will become more transparent and more harmonised, to benefit businesses. The governor said that once the GCC countries achieve the two stages of the monetary union, they will enter the final stage, which will, require enacting and implementing similar laws in all the GCC countries, to enable the common markets to take its shape.

"Following achieving a high degree of the GCC's common market, plans will be made for the single currency, which can add engines for further growth in an environment of a well functioning Common Market, he told the Forum. He hinted that recession and other fears may affect GCC growth, but China and India, the two Asian economic powerhouses will continue to benefit the oil producing nations, who market their products to those high growth economies.

GCC GDP: Sultan Nasser Al Kuwaiti said that total GDP of the GCC during the year 2008 would touch $805.3 billion up from $760.9 billion, up 5.8 per cent and in year 2012 the GDP will cross $1013.6 billion at a high rate of 6 per cent.

This year Qatar with 14.1 per cent economic growth will lead the regional bloc, followed by UAE by 6.6

per cent and both nations will continue this trend till 2012 growing by 10 per cent and 7 per cent respectively.

Banking: The banking pectoral Kuwaiti said the sector has largely benefited from oil revenues, economic

growth and massive infrastructure expansion. "The total deposits will reach $552 billion in 2008 from

$493 billion, growing at a rate of 12 per cent," he added. Total loans and advances will grow to $546 billion, up ten per cent from $417.3 billion during year 2007.

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