Economies in the Arab world could take a decade to recover from a political crisis that has wiped $140bn off the region’s exchanges, top economist Nouriel Roubini said.
The CEO of Roubini Global Economics said political unrest could lead to fiscal “turmoil” and compared the possible recovery period to the “decade” it took Eastern Europe after the fall of the Berlin Wall in 1989.
“We’re moving in a period of time where there’ll be more uncertainty,” he told Arabian Business. “There’s more pressure for political rights and income. You might see workers striking for more income, and that could lead to a rise in inflation, budget deficits.”
Speaking at the Middle East Investment Summit in Dubai on Tuesday, Roubini said the turmoil will deter fresh investors eyeing the region and that only those very familiar with local economies would risk funds.
“We shouldn’t kid ourselves that it will be easy [to attract investors],” he said. “In this [political] environment it’s very hard to make long term investments unless you know the region well.”
Roubini was dubbed “Dr Doom” for his warnings predicting the global housing and financial crisis.
Popular revolts sweeping the Middle East and North Africa, home to more than half of the world’s proven oil reserves, have pushed Brent crude-oil prices close to $120.
Spiking prices have not yet had a major impact on the global economy. But with one of the world’s top producers, Libya, currently fighting what some have called a civil war between dictator Muammar Gaddafi and his people, they could continue to rise.
Roubini said that would create a problem for economies far wider than the Middle East. He said that if oil prices reached the highs of the summer of 2008 – which saw $140 per barrel – some advanced economies would start to double dip.
“If oil goes up another 15 to 20 percent [from the current prices], there’s a risk to the US, the Eurozone, Japan.”