Regional conflict costs GCC one percentage point of GDP a month, economist says

Every month of the regional conflict costs GCC economies the equivalent of one percentage point of GDP in deficit, Khaleej Times reported. Allianz Chief Economist Ludovic Subran issued the warning at the Rise summit in Dubai. He urged the region to tap international markets to finance growth.

How much is the regional conflict costing the GCC?

Subran said each month of conflict adds the equivalent of one percentage point of GDP to GCC deficits. He urged Gulf economies to raise money in international markets to fund growth. He also praised the region’s response, saying that seven months into the conflict it has shown resilience.

What do international investors want from the GCC?

Subran spoke at the Rise summit at Dubai World Trade Centre. He leads economics at an €800 billion asset manager. He said international investors want three things before committing more capital: a clear path, bankable projects and a partner to invest alongside.

He said the region has offered this through Vision 2030. His final message was simple: keep the vision, and the capital will come.

Is global trade in recession?

Subran said global trade is in recession this year if AI is excluded. Trade is up 1 percent, but down 4 percent without AI exports, goods and services. He said the figure shows how much the world economy depends on one sector.

Data center spending and the AI economy still drive global and US growth, he said. He believes the AI boom has time to run. The world is 80 quarters into the AI spending boom, and past technology booms lasted about 24 quarters, so “there’s still a few miles left to go.”

What is the outlook for the US economy?

Subran said the US economy is in war economics. The public sector is running a 7% deficit. The corporate sector is doing fine, but the public sector is not.

He expects the Federal Reserve to cut rates two or three more times in 2027 to avoid recession. He put the new neutral rate at about 3%.

He also flagged rising credit risk outside the AI sector. He is concerned about fallen angels and named Oracle as a company at risk. He said the risk of Oracle falling to junk status is very high.

Where should investors put their money now?

The traditional bond-equity hedge no longer works, Subran said. He pointed to infrastructure and private credit. He said infrastructure is resilient through the cycle, on both debt and equity.

He also changed his long-held view on gold. He once thought it was for weddings. Now he sees a role for it in portfolios because China is using gold to internationalize the RMB.

On real estate, Subran saw opportunity in the region’s recent correction. He said prices have fallen at least 10% through September. He said it may be a good moment to re-enter.