The effects of the 2008 financial crisis on the investment in the Gulf area especially on Qatar - Essay Example

The high unemployment rate and the collapse of the financial institutions cumulatively limited the potential of individuals and corporations to invest. The Gulf Area experienced a period of oil-boom during the period between 2003 and 2008, a time when the economy grew by double figures. Qatar was a major distributor of oil in the world and the rising demand underpinned the increase in its sales during this period. The impact of this is that there was reduced unemployment, rise in economic class and the growth of the gross domestic product (Khamis, Senhadji, Hasan, & International Monetary Fund, 2010).

On the other hand, the economic development resulted to increase in the public confidence and hence increased borrowing from monetary banks. The public’s incentive to invest and take advantage of the growing business opportunities led to the increase of loans from both public and private sector. As a result, the year 2007 marked the peak of economic debts in financial institutions. During this period also, the international monetary funds and the World Bank encouraged financial institutions to provide low interest loans for the local people to inspire investment (Siddiqi, 2013).

The negative impact of this is that the potential to invest became much higher than the available business opportunities, leading to business failure. The global recession affected the world at large and this resulted to an adjustment of the world economic situation. The reduction in the value of local currencies resulted in the decline of the purchasing power. The impact that this had is that there was reduced economic exchange in the international business market. Qatar experienced a period of reduced demand for oil from western countries, which resulted to reduction into its national income.

Consequently, the country experienced retarded economic growth, and the GDP