Interview: Ibrahim Dabdoub, NBK
The Group CEO of the National Bank of Kuwait, Ibrahim Dabdoub, tells Trends about how the global economic meltdown was good for the Gulf.
January 27, 2010 10:50 by Julien Hawari
The region had been growing for three years and suddenly the global financial crisis hit. In your view, what have been the main consequences of the crisis in the region?
Well, the immediate consequence has been the collapse in the price of oil because of the fall off in consumption.
The oil price of $140 was not sustainable – and not advisable in the first place – because the global economy can’t absorb it. It was a mistake. It really is a globalized world now. You’re not on your own anymore.
Whatever affects the US or Europe is bound to have a ripple effect.
Then Lehman Brothers failed and we said, we’re okay, we have surpluses in Kuwait, we’re in good shape financially. But then we realized we were affected, at least psychologically.
I was walking in a mall here, and a restaurant waiter who recognized me came up to me and asked: “Can you please tell me how long this crisis will last?” Surprised, I laughed, and said I hoped it wouldn’t take too long.
So what has happened? This guy will most probably put the brakes on spending and start saving more.
And this is a small guy, but this applies to the big guys also, and to companies, and so on.
This is what happened in the region?
Exactly. Car sales in Kuwait went down 30 percent in 2009. Clothing sales by 35 per cent. Why? Because people were worried. It was like a storm that hit everybody. You figure the best thing to do is to save money. So the consumer stops spending and starts saving.
And the banks, according many, are going to a new normal, which is: credit will be minimal, and borrowing by both the banks and their customers will be minimal.
With luck governments will start spending more because the economies of the Gulf do depend greatly on government expenditure.
Luckily, now, the government of Kuwait has started spending, though a little late. But at least it’s started.
This applies also to Saudi Arabia, Abu Dhabi, and Qatar.
Do you think that, in terms of business, this crisis was good thing for the region, and has the business community learned something? For some countries, it’s the first real financial crisis they’ve had to go through.
Absolutely. You know, if you look at it philosophically, it’s a wake-up call. It has hit some of us financially.
We – banks, businesses – were living in a very superficial way. We thought that it was a one-way street, that the economy would always go up, never down.
At least now there is a realization among banks, businesses, investors, and even the government and regulators, that it just isn’t so.