The UAE will achieve positive growth this year despite the effects of the global recession, Sultan al Mansouri, the Minister of Economy, has forecast. GDP would slow to 0.5 per cent or 1 per cent this year as a result of falling crude revenues, he said. Mr al Mansouri's forecast is broadly more optimistic than revised projections from the IMF and a leading international bank released in the past week.
"My view has been for flattish growth to a slight contraction this year but the minister may have new data we have not yet seen," said Dr Giyas Gokkent, the chief economist and head of research of the asset management group at the National Bank of Abu Dhabi. Mr al Mansouri's comments were reported by the Arabic newspaper Al Khaleej. A strengthening in oil prices over recent months prompted the IMF to last week upgrade its GDP forecast for the UAE to a contraction of 0.2 per cent, instead of the 0.6 per cent contraction it had forecast in May.
Standard Chartered said earlier this week the economy would contract 0.5 per cent after previously predicting an expansion by the same percentage. Crude prices have risen to about US$70 a barrel from a five-year low of $32.40 a barrel in December. Sultan al Suwaidi, the Governor of the Central Bank, said earlier this week in Istanbul that the UAE would see economic recovery in the middle of next year. He previously said the economy might shrink or grow slightly this year.
The IMF said the UAE would return to positive growth next year, with the economy likely to expand by 2.4 per cent. Economic growth in the country reached 7.4 per cent last year. The worst international recession in 60 years has put the brakes on economic growth in most countries across the globe this year, with oil-reliant GCC states also suffering as a result of a decline in crude prices from record highs of $147 in July last year.
Lower housing costs would help bring average inflation in the UAE down to 3 per cent this year, Mr al Mansouri was also reported as saying. Consumer prices edged up 0.48 per cent in August compared with July, according to the latest inflation figures from the Ministry of Economy. Inflation averaged 2.56 per cent in the first eight months of this year, compared with 12.3 per cent last year as the country experienced soaring prices for food and property.