The Middle East is going to come out of the current economic downturn faster than the rest of the world but it is not immune to setbacks like the Greek liquidity crisis that can hit growth in the GCC.

That was the message from Ernst & Young Middle East Transaction Advisory Services managing partner Phil Gandier at a breakfast seminar on the capital agenda at the Sheraton hotel in Manama yesterday.

"Middle East companies are not as reliant on debt financing as elsewhere and have not been as leveraged in the past," he said.

"I am not saying there is no problem here but it is less of a problem than elsewhere so I would see the region pick up faster than the European economies.

"But the European problems will still have an effect out here," he said. "There are problems with fundamentals and problems with sentiment and it is sentiment that is the problem in the Middle East.

"If businesses out here believe the Greek debt crisis is going to have global implications, then they will be concerned about investing at a time of problems in world markets.

"I would expect GCC economies to grow by about four per cent next year and probably around 2pc to 3pc in the current year and that is a growth we will see across the board in real estate, manufacturing and financial services," he added.

The breakfast seminar themed the Capital Agenda held yesterday is one of a few that Ernst & Young Middle East is planning for the future.

"We hope to address a number of issues at these two-hour seminars which addresses issues business wants to debate," Mr Gandier added.

Yesterday's event included discussions on key findings from Ernst & Young's ongoing global study - Capital Confidence Barometer.

The recent report measures corporate confidence in a changing market.

Findings from the study reveal a resounding sense that the business landscape has changed in fundamental ways creating both opportunities and risks.

"While there are still uncertainties over the exact speed, shape and size of any upturn, the study revealed an overall note of caution," said Mr Gandier.

"Over 50pc of the global respondents expect the financial crisis and downturn to persist for at least more than one year in their own industry and 70pc of companies expect the downturn in the broader economy to persist beyond the next 12 months.

'At least 28pc believe it will continue for more than two years."

The Capital Confidence Barometer indicates that the next 12 months will see the rise of a few winners in each industry.

It also reveals an emerging polarisation of businesses among those gearing up to capitalise on acquisition and growth opportunities and those that feel constrained, stifled and unprepared in their ability to do so.

"The new norm of continuing uncertainty, weaker demand, margin erosion, scarcity of capital and increased risk aversion in strategic decision-making has narrowed the margins for error in capital allocation," Mr Gandier said.

"Many companies feel inclined to hoard cash and be reactive, but winning companies will avoid the temptation for inertia, and use their capital to seize opportunities," he added. -TradeArabia News Service