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29 March 2024

UAE economy to grow 2% in 2010: AMF

The UAE budget is expected to to record a surplus of Dh14bn. (FILE)

Published
By Nadim Kawach

The UAE economy is projected to grow by around two per cent in 2010 after contracting by nearly one per cent last year because of the global fiscal crisis and lower oil prices, the Arab Monetary Fund (AMF) said on Tuesday.

The Abu Dhabi-based AMF, an IMF-style regional institution affiliated to the Arab League, also expected the country’s fiscal balance to record a surplus of around Dh14 billion, nearly six per cent of the forecast GDP this year.

“Preliminary estimates show the UAE’s real gross domestic product will grow by around two per cent this year against a contraction of one per cent last year,” the AMF said in its semi annual economic and market report for the Arab nations.

The report estimated inflation in the UAE at around 2.2 per cent in 2010, slightly higher than the 1.5 per cent rate recorded in 2009 but sharply lower than the record high level of nearly 12.3 per cent in 2008.

The report gave no breakdown for the GDP growth but analysts expect the non-hydrocarbon sector would drive overall growth on the grounds the UAE’s crude production is not expected to see a major increase this year.

The domestic economy shrank in real terms last year despite a massive fiscal stimulus announced by the UAE to counter the effects of the global crisis. Experts believe the decline was mainly in the oil sector as the UAE has cut crude output by around 10 per cent in line with a collective OPEC decision to trim oil supplies to prop up prices following their collapse because of the crisis.

Forecasts by the AMF, which groups the Arab League’s 21 nations, showed the UAE’s consolidated financial account (CFA) would record a surplus of around Dh14 billion, nearly six per cent of real GDP.

The surplus is more than triple the Dh-four-billion positive balance recorded in 2009 but largely falls short of the record high surplus of Dh197 billion in 2008, when crude prices shot up to their highest ever average of $95 a barrel.

In an earlier report, the AMF said the UAE’s overall spending peaked at around Dh289 billion in 2009 despite a sharp decline in oil revenue because of lower prices and production. The 2009 expenditure was way above the 2008 spending of Dh254 billion although oil prices in 2008 were 58 per cent higher than in 2009.

In its report on the UAE’s CFA, which comprises the federal budget and spending by each emirate, the AMF cited official figures showing revenue in 2009 plunged to around Dh292.6 billion from a record high of Dh450.3 billion in 2008.

It said the decline was a result of a sharp fall in hydrocarbon export earnings to nearly Dh217.5 billion last year from a peak of Dh362.1 billion in 2008.

The UAE has not yet released budget details for 2008 and 2009 but official data for its CFA in the past four years showed it has recorded massive surpluses. The surplus stood at around Dh75 billion and Dh69 billion in 2006 and 2007 respectively and was achieved despite a steady rise in actual spending.

The UAE has largely boosted expenditure over the past few years to cope with growing domestic development needs. Spending has picked up in the past two years as part of the counter-crisis fiscal measures.