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Every month of the regional conflict is costing GCC economies the equivalent of one percentage point of GDP in deficit, Allianz Chief Economist, Ludovic Subran warned, urging the region to tap international markets to finance growth.
But Subran opened his remarks during a summit in Dubai with praise for how the region has responded to the crisis. "I'm here to show that this region has actually already, seven months into the conflict, shown that they are resilient," he said. "It's not how high the buildings are, it's how resilient the people are."
Speaking at the Rise summit at Dubai World Trade Centre, the chief economist of the €800 billion asset manager said international investors want three things before they commit more capital: a clear path, bankable projects, and someone to invest alongside.
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"What this region wants to see is a clear path, very bankable projects, someone to invest alongside, and a clear direction," he said. "And I think this is what this region has offered through Vision 2030."
Global trade in recession
He also delivered a stark warning on the state of global trade. "Global trade is in recession this year, if you take out AI," he said. "It's plus 1 per cent global trade, but it's actually minus four if you take out AI exports, goods and services."
That single number, he said, shows how much the world economy now depends on one sector. "That tells you how much of the capex on data centres and the AI economy is still the big front-end running factor behind global and US growth."
But Subran believes the AI boom still has time to run. "We are 80 quarters into the AI capex boom," he said. "Historically, capex cycles for technological booms last 24 quarters. So there's still a few miles left to go."
US economy
Subran described the US economy as running on a war footing. "The US economy is in war economics. The public sector is running a 7% deficit," he said. "The corporate sector in the US is going okay, but the public sector is not going very fine."
On interest rates, Subran predicted the Federal Reserve will be forced to cut. "I still think the Fed will have to cut rates two or three more times in 2027 not to be in recessionary territory," he said, putting the new neutral rate at around 3%.
He also flagged rising credit risk outside the AI sector. "I'm a bit concerned that we start to see fallen angels," he said, naming Oracle as a company at risk. "The risk of Oracle going fallen angel is very high."
Where to put money now
With the traditional bond-equity hedge no longer working, Subran pointed to infrastructure and private credit. "I love infrastructure," he said. "I think infrastructure is resilient throughout the cycle, both on debt and equity."
On gold, he admitted changing his long-held view. "I always thought that gold was for weddings," he said. "But now I understand that gold has a role to play in portfolios because China is using gold to internationalise the RMB."
And on real estate, he saw opportunity in the region's recent correction. "It's a 10% correction, at least what we've seen through September," he said. "Maybe it's also a good moment to re-enter."
His final message to the region was simple: keep the vision, and the capital will come.