Gulf banks have spent more than $20bn on provisions for bad debt and lost investments but are showing signs of returning to high profitability, Standard and Poor’s said. But it said it believed those banks appeared to show “signs of improvement,” saying that the economies of the GCC were starting to recover, thanks to high oil prices and government policies.

Dubai’s image as the Singapore of the Middle East is being tested as it tries to clamp down on excesses such as fraud and overdevelopment, which came with an explosion of people and investment. Its judicial system still has a long way to go to catch up with Western nations that it aspires to emulate, say lawyers and economists who work there.

Although the volatility in European markets has not had a “significant” effect on the average cost of funding in the Middle East, the region’s economic growth is expected to remain weaker than pre-crisis levels, according to Moody's.“The pace of economic recovery is hesitant and varied (as in other regions) and that the fragility of the global environment poses downside risks to the Middle East,” the agency said in its just-published mid-year update to its Middle East Sovereign Outlook.

Diversification is the key to higher returns. The aim of a well-diversified portfolio is to mitigate risk, yield stable returns and provide ample liquidity. It is unwise to put all your eggs in one basket. Diversification involves investing your money across various asset classes.

FDI flows to the Middle East has contracted by 24 per cent to $68 billion (Dh249.75 billion) in 2009, according to World Investment Report. "Except in the case of Kuwait, Lebanon and Qatar, inward FDI declined across the region. The contraction hit Turkey and the United Arab Emirates the hardest. In Turkey, cross-border mergers and acquisitions plummeted, and export-oriented industries suffered from the impact of the global crisis," the report said.

"We are now, I fear, in the early stages of a third depression," the Nobel Prize winning economist Paul Krugman wrote in his New York Times column, referring to previous U.S. depressions that started in 1873 and 1929. "And this third depression will be primarily a failure of policy."

Labour costs and the value of China’s currency are sending ripples around Asia as countries jostle to lure manufacturers that are re-thinking their Chinese operations, analysts and officials said. Worker unrest at foreign-owned factories and the prospect of higher wage costs are forcing some manufacturers to consider countries such as Bangladesh, India, Indonesia and Vietnam, where wages remain relatively low.

Indian Prime Minister Manmohan Singh has said the Group of 20 major and emerging economies should not rein in budget deficits too fast but co-ordinate policy to ensure a sustained economic recovery. “My own feeling is that early fiscal retrenchment carries very considerable global risks,” Singh said at the G20 summit in Toronto.