The debt to GDP (Gross Domestic Product) ratio is one of the main indicators used to measure the health of an economy. Obviously the lower the figure the better. The more services and goods produced by a country should ensure that it will be in a better position to pay off its debts.
What is currently happening is little short of mind boggling! At the end of 2011, it was reported that the US Debt Ratio went past 100% for the first time in its history with its debt having shot past US$ 15 trillion. In anyone’s language this is a huge sum with each citizen in hock to over U$ 48k.
But what is more worrying is that the USA just makes the top 20 of debtor nations with 17 European countries worse off. The usual suspects are all there and not surprisingly the Irish top the lot with a per capita debt of U$ 567k and debt to GDP ratio of 1382%.
The UK comes in at a distant number two with a ratio of 413% and a per capita debt of U$ 147k.
What is good news for us in the UAE is that the debt ratio for the country is south of 20% whilst Dubai comes in at shy of 40%.
It seems that universal growth rates are on the decline and this despite horrific forecasts this time last year, the economy is holding up well with 2011 growth at over 4% – almost double on the previous year. 2012 should see this growth pattern continue.
What will happen to property is anybody’s guess! One thing is certain – there are many other places in the world where housing markets will be a lot worse than what we have here in Dubai. Maybe the medicine taken over the past two years is finally curing the patient.
One word sums up currencies in 2011 – volatility. This year will see continued problems in Europe and do not be surprised to see the return of the drachma as the euro’s demise gains further momentum. If you have the ready cash, move it to the Turkish lira or Norwegian kroner and follow the example of the new Jamaican leader, who wishes to remove the queen as titular head of that country.
The UAE dirham – pegged to the US dollar will be a safe haven. A pity about the pitiful interest rates! (The banks however get their pound of flesh by charging exorbitant interest rates on occasions that they deem to lend to their clients).
Be wary of emerging markets especially when 2011 prices dropped over 20% in Brazil, Russia and China and 35 % in India. Maybe the market knows more than the plethora of investment advisers who extol the virtue of the BRIC economies. In comparison what’s wrong with the local Dubai market where stocks only fell by 17%?
And what about the oil?