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The UAE economy swelled by 4.9 per cent in 2011 to surpass earlier expectations due to higher oil output and expansion in the non-hydrocarbon sector, the International Monetary Fund (IMF) said in a statement yesterday.
Real GDP growth is projected to moderate to 2.5 per cent this year but non-hydrocarbon growth will remain strong, said Harald Finger, who led an IMF mission to the UAE during February 28-March 14 to conduct discussions for the Article IV consultation with the country.
The mission met with Minister of State for Financial Affairs Obaid Humaid Al Tayer, Minister of Economy Sultan Bin Saeed Al Mansoori, Central Bank Governor Sultan Bin Nasser Al Suwaidi, other senior government officials, as well as representatives from the business and financial community.
“The economic recovery looks set to continue. Real GDP growth reached an estimated 4.9 percent in 2011, supported by increases in oil production,” Finger said, noting that the Washington-based IMF had earlier project 3.5 per cent growth for the UAE economy, the second largest in the Arab world.
He said non-hydrocarbon growth also strengthened, to around 2.7 per cent, backed by strong trade, tourism, and manufacturing.
“Real non-oil GDP growth is projected to further strengthen to 3.5 per cent in 2012. With limited potential for further increases in oil production in the near term, overall GDP growth is expected to moderate to 2.3 per cent,” he said.
He expected inflation in the UAE, a major OPEC oil producer, to remain subdued at around 1.5 per cent this year.
“The current uncertain global economic and financial environment poses a number of risks to this outlook,” he said.
According to Finger, the large increases in public expenditure that took place in response to the 2009 crisis should now be unwound as they expose the UAE to the risk of declining oil prices.
“The planned gradual pace of fiscal tightening will strengthen public finances without undermining the economic recovery. The recovery will also continue to be supported by an accommodative monetary stance under the peg to the US dollar,” he added.Follow Emirates 24|7 on Google News.