Financial Crisis? Thy Kingdom Come
The effects of the global economic crisis are being felt the world over. But our region is somewhat different. While Dubai suffers, Qatar stays silent and Lebanon goes on imperviously, it is Saudi Arabia that has emerged as a global powerhouse. The crisis is reshaping the economic map and the Kingdom is looking more and more likely to come out of this as a victor of sorts.
On a consumer level, manufacturers are expecting the world's largest oil exporter to continue to spend big despite the rest of the world cutting back. On a macro-level, Saudi Arabia is even being asked to come to the rescue of Western Powers as can be seen from the fact that Prime Minister Gordon Brown of Britain has already asked the Saudis for money to bolster the IMF.
Of course Saudi Arabia is not alone in this regard. The amassed savings of the Gulf are now a major capital source for Western banks and governments looking for salvation. A fine example is how Barclays Bank turned to Qatar and Abu Dhabi in late 2008. Qatar Holding, a subsidiary of the Qatar Investment Authority and an investment vehicle of Qatar’s Sheikh Hamad, doubled their stake in the bank to almost 15.5 per cent. Sheikh Mansour of Abu Dhabi took a 16 per cent position in a purely personal capacity.
Yet all oil exporters are going to be indirectly affected by the decrease of oil and petrochemical prices as the economic growth in industrial countries would slow and impact demand on energy. Indeed the price of oil has dipped to below 60 USD a barrel as of late (more than 50 per cent down from record levels earlier this year) but the Saudi government recently stated that it is nevertheless forecasting growth for 2009. With huge foreign exchange reserves and an economy that has enjoyed mammoth growth in recent years as the oil price soared to record levels, anonymous sources are even bullishly stating that the Saudi market will remain strong even if we reach 40 USD a barrel.
So what does this mean for luxury brands? Figures released by Camper & Nicholson, an international yacht brokerage firm, showed that new orders for superyachts had grown 18 per cent in 2008. By and large that is thanks to Indian and Middle Eastern customers. On the other hand, Russia is no longer seen as a strong market. That is not too surprising when analysts report that the combined wealth of the 25 richest Russians fell 68 per cent in the past five months.
Auto makers are also very upbeat about the Kingdom’s importance. Traders at a luxury car exhibition in the Red Sea city of Jeddah said sales are holding up and are expected to increase this year.
While ordinary Saudis may be feeling the pinch over the past year as inflation soars to 30-year highs, the Kingdom's elite have continued to prosper. There are ever more ‘High Net Worth Individuals’ and consumption is up more than ever. So while the international press pumps out unpopular news, we at Bespoke, give you a different beat to the story. Ultra-high luxury is the way forward.
