Is the Gulf entering or coming out of Recession?



During the last 12 months, analysts and researchers from the most prestigious firms, such as BofA Meril Lynch and EFG Hermes, produced reports aiming to convince the general public that The Recession is well over and behind us.

In 2010, UAE’s GDP growth is roughly projected to reach nearly 2%, while inflation is even slowly rising.

According to the definitions, recession is a business cycle contraction, a general slowdown in economic activity over a period of time. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions, while defaults and the unemployment rate rise. Official recession is declared when the economy contracts for two consecutive quarters and unemployment rises above 10%.

A recent report issued by said that unemployment rate in the Gulf states reached 8.8 percent last year and is set to rise to 10.5 percent in 2010. According Dubai Chronicle’s web statistics, the most searched key words  on the Internet lately are : jobs, employment, career, recruiter, work from home, freelance etc.  Advertisement, which attracts the largest number of hits is also related to employment and recruitment, with the most successful formula – Professional, Managerial & Executive Openings!.

So, is the Gulf entering into Recession or is in early stage of recovery?

From another point of view, one of the most regular features of the recession cycle is that  inflation falls in the early stages of recoveries. This is because spare capacity is always high coming out of recessions, with high unemployment, vacant offices and apartments, and under utilized factories.


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