The Minister of Economy says a trade rebound should help the economy expand in the second half of this year.
Trade growth to lead recovery
A trade rebound should help the economy expand in the second half of this year, the Minister of Economy said yesterday as the country's global ports operator reported a rise in container volumes. Improving shipment volumes in the country and globally were expected to bolster growth, said Sultan al Mansouri. "Freight and cargo business is picking up and that should be part of the cycle in the next three to six months, which is positive for trade," Mr al Mansouri said in Sharjah.
Further signs of a resurgence in trade emerged yesterday from the ports operator DP World, a unit of the Dubai Government-controlled Dubai World. Gross volumes from its 49 operational terminals grew 15 per cent to 11.2 million twenty-foot equivalent units (TEU) in the first quarter of this year compared with the same period last year. Led by strong demand in the Asia-Pacific region and Australia, first-quarter volumes also exceeded 2008 levels, DP World said.
Mr al Mansouri said an increasing volume of exports from the UAE was evidence that traders were preparing to rebuild stocks again after clearing excess inventories built up during the global financial crisis. "But we need to rely not only on ourselves but on what's happening in other countries like China, India and the US, as it's all interconnected," he said. Led by the Far East and the Indian subcontinent, world trade is expected to expand by 9.5 per cent this year, the World Trade Organisation has forecast. As a trade centre linking Europe, Africa and Asia, the UAE is expected to benefit through greater re-export volumes.
Steadily rising oil prices would also help to underpin a return to growth for the economy this year, Mr al Mansouri said. Depending on crude prices, the economy would expand by up to 2.5 per cent, he said. The forecast was lower than the 3.2 per cent projection Mr al Mansouri gave last month. The IMF last week said it expected GDP in the UAE to grow 1.3 per cent, double its own earlier prediction.
"I'm very positive oil prices will give the UAE a push to utilise these revenues to inject into infrastructure and revitalise the economy," he said. Rising global demand for oil, led by fast-emerging economies in Asia, has pushed crude to about US$85 a barrel, about 80 per cent higher than a year ago. The UAE Government is pouring its revenue from oil into upgrading its civil infrastructure, with projects under way including the Dubai Metro and airport expansions in Abu Dhabi and Dubai.
The Government was increasingly looking for investment in trade, along with logistics, tourism and industry to refocus the economy after a contraction in the country's property market, Mr al Mansouri said. DP World said it expected improved results this year compared with last year because of the return of volume growth, combined with cost reductions and efficiency initiatives. In the UAE, volumes rose 1 per cent in the first quarter this year over the same period last year, with ports in the country handling 2.6 million TEUs.
"During the first quarter of 2010 the industry has seen continued signs of a return to container volume growth around the world," said Mohammed Sharaf, the chief executive officer of DP World. "It is, however, too early to confirm sustainability, as the macroeconomic environment and global trade patterns remain somewhat unpredictable, impacting traders and their shipping requirements." DP World said it was committed to listing its shares on the London Stock Exchange as soon as possible.