Appreciating emerging market currencies, the Asean region in particular, may have a number of implications for GCC economies and their dollar-pegged currencies, Barwa Bank CEO Steve Troop has said.

The region’s hydrocarbon exports become more affordable in faster growing Asean countries.

“This is positive for both production in the Gulf and sustained growth for Asean countries, many of whom are import-dependent on energy supplies,” Troop (pictured) wrote in www.investvine.com, a news portal. 

Another implication of the appreciating emerging market currencies is that food items will become pricier, Troop said.

Imports into the Gulf — particularly foodstuffs (rice, wheat, barley), much of which comes from Asean may well become more expensive in local currency terms with inflationary implications for the GCC countries.

Food prices are always sensitive (even in the relatively wealthy nations): government subsidies are already in place for some food staples in the Gulf and price-equalisation will cost Gulf governments more money. (Given the fiscal position of the majority of the Gulf countries, this is not seen as a significant issue.)

Inward investment into the GCC becomes less expensive for Asean countries, though contracting work in the region looks less attractive for Asean contractors, many of whom have, historically, been very keen on construction contracts particularly.

But, Troop said, a slump in GCC investment into the Asean region may happen if the Asean currencies appreciate.

Outward investment from the Gulf into Asean (where assets acquired are priced in domestic currency) will appear more expensive to Gulf investors.

“This may give pause for thought,” Troop said.

Troop said, “Recent currency moves may re-kindle conversations about “baskets” and a move away from outright pegging to the dollar: however, the moves do not have sufficient impact to sustain the argument. Gulf leadership is committed to the dollar-peg for the medium and long term given that the dollar is the government’s principal receivable for oil and gas exports.”