Is it time to use the R-word (recession) in Dubai?

“You can’t say that word here.” I was confused. “What word?” I asked.

Khalid lowered his voice, and leaned so far across the table that he endangered his white agaal grazing through the glasses of karak tea between us. He raised his eyebrows and mouthed the word as though to keep it a secret from the angels.

These days, I hear the R-word whispered in hushed tones across boardrooms and hotel lobbies nearly daily. We’re not allowed to say recession in Dubai. But the good news is that as my friend Khalid reminded me, there is a big difference between fact and opinion. Recession is a matter of opinion, and as a strategist and an advisor, I’m more interested in the facts.

I’ve heard the same rumours you have: Russian sanctions, Chinese recession, the oil price is driving GCC investors out of the market, and now Brexit is pulling out the Brits. It’s an economic hurricane. What could possibly come next, right? GCC investors really are worried. They’ve been holding tightly to their cash this year, consolidating their resources, reducing their fixed assets, and limiting their market exposure. I do hear from my friends and clients that there is an unspoken expectation that a 2009-esque storm is coming again.

I’m sympathetic, but I’m not convinced. It’s time for some calm reflection. Just breathe. Dubai is just fine.

Where’s the smoking gun? The economic ingredients that caused 2009 just aren’t there anymore. The US mortgage backed securities and default swaps that caused 2009 have been regulated out of the market, as has been the high-leverage property purchasing in Dubai. So if it’s not 2009 all over again, then what are we feeling? It’s much more likely that what we are feeling is a natural ebb and flow of macro-economic trends.

1. The US Federal Reserve increased the interest rate less than a year ago for the first time since 2006. This means that very slowly, the tide of US currency will shift from outflow to inflow. That’s a major global economic shift, and there is a natural lull in the market when something this big happens, especially in the world’s primary currency. The change takes time, but once this tide turns, money will flow again.

2. The oil price had a lot of GCC investors worried. With the US as a net exporter and Iran online as a supplier now, the oil economy is far more competitive than ever before. Even Saudi Aramco is talking about floating some stock. It looks like lower prices will probably remain the norm, and I expect it will hover around the $50 mark for a while. Once investors see that stability and reorganise their priorities, money will start to flow again.

3. Stable lower oil prices provide a competitive advantage for derivative industries such as logistics, plastics, and paving. These industries will get a boost from lower oil prices and that boost will take a little while to trickle down. When it does, and we see luxury penthouses purchased by plastics barons (hyperbole? perhaps, but you get the idea), then we’ll know the tide has shifted and money is flowing again.

4. With most eyes fixed on the North-Western skies, I’m looking South-East. India and South Asia are growing. Morgan Stanley upped its estimates for the growth of the Indian economy in 2016 to 7.7 per cent. OECD is expecting 6.2 per cent growth in Vietnam, and 8.2 per cent in Myanmar. Emerging economies are creating new capital flows from unexpected sources.

These trends are macro, so they take time, and it can be difficult to focus on the natural movement of the ocean when you are trying to stay afloat in the waves. But consider this, when these capital flows start to move again, savvy GCC investors are going to look around for an investment economy that is relatively oil-independent, untethered from China and Russia, and perhaps at a safe economic distance from the EU-UK drama. There is only one real oil-independent economy in the MENA region: Dubai, 96 per cent oil-independent to be precise, and that’s a fact.

In the middle of these lulls and shifts, Dubai increased spending on infrastructure by 16 per cent. The PMI has been above 50 for the last few months already. We’re building the Canal, the Frame, the Ferris wheel, and the largest indoor theme park in the world right now. And it’s not a coincidence that Emirates Airlines is starting daily flights to Hanoi, Vietnam and Yangon, Myanmar in August this year. These are not recession-like behaviours, and certainly not anything reminiscent of 2009. So where do you think those savvy GCC investors are going to go?

So the next time the conversation curls up into a whispered tone and your colleague leans over the kunafa to ask if Dubai’s economy is in a recession, remember the gap between fact and opinion. We’re definitely feeling some waves from a few concurrent macro-economic shifts, but to those that see the horizon, this is not a recession at all, and that’s a fact. Set your gaze above the waves and position yourself to ride the tides.

Corrie Block is managing consultant at Zyada Consulting