UAE to grow by 4-5% in 2011

The United Arab Emirates' economy is expected to grow by up to 5 per cent this year and the oil producer saw no significant change in capital flows due to regional unrest, its central bank governor said on Wednesday.

The world's third-largest oil exporter has escaped a regional wave of protests against autocracy and economic hardship, which boosted its safe haven status.

"There is absolutely no significant change," Sultan Nasser Al Suwaidi told Reuters Insider television when asked about capital outflows following the regional unrest.

"But of course, we are taking measures. Should there be any significant change we will take steps," he said on the sidelines of an economic forum in Kazakhstan without giving details.

Debt insurance costs for Dubai fell sharply over the past weeks, while those for nearby unrest-hit Bahrain, which saw a capital flight, remain elevated.

Suwaidi declined to comment on whether the regional turmoil was going to change investment strategies of sovereign wealth funds -- the UAE's Adia is one of the world's richest -- but said the Opec member's economic growth would not be hit.

"The UAE is linked to many, many other economies, other than just certain economies. Therefore, the growth rate will stay at forecasted between 4 and 5 per cent this year," he said.

"So I don't expect there will be a significant impact from the developments," he said.

Rising trade flows and oil prices above $110 per barrel were expected to help lift UAE economic growth to 3.4 per cent this year from an estimated 2.2 per cent in 2010, a Reuters poll showed in March.

LENDING REASONABLE

Suwaidi also said rents are expected to keep a lid on inflation if food and fuel prices were to go up as the real estate sector remained under pressure, echoing his recent comments that lending growth though sluggish was reasonable.

"Under the circumstances, the lending rate is reasonable and in line with the supply and demand. The Dubai debt is behind us, Dubai issues have been sorted out more or less," he said.

UAE inflation eased to a six-month low of 1.2 per cent in March, while loans and advances in the Gulf Arab country's banking system rose 2.6 per cent in the same month.

Suwaidi said the UAE would not join a planned Gulf monetary union sought by Saudi Arabia, Kuwait, Qatar and Bahrain.

"I think there is no consideration," Suwaidi said. "No, I don't think so," he said, when asked whether anything could be done to bring the UAE back.

"It (progress) will slow down, but whoever you ask, they will tell you that they are proceeding," he said.  The UAE withdrew from the plan to launch a common Gulf currency in 2009 in protest to place a forerunner of the joint central bank in Saudi Arabia, three years after Oman.

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