The Government of Abu Dhabi needs to deploy its enormous financial muscle to support banks and fund major projects as part of an overall economic rescue plan, the Emirate's economic policy advisory body has said.
The Abu Dhabi Council for Economic Development (ADCED), said the emirate and the whole UAE are not immune from the effects of the global crisis and government intervention is needed to mitigate those effects, stimulate the economy in the long-term and regain confidence in the financial system.
In a study, ADCED referred to what it described UAE Government initiatives to inject funds into the banking sector, but said more measures are needed to be taken by the Gulf country given its large financial resources.
"The Abu Dhabi Government is called upon to take advantage of the global financial crisis and turn it into an opportunity to support development and achieve prosperity in the emirate and the UAE," the study said.
"What is needed is a comprehensive economy stimulant package, which involves public spending on mega projects and the infrastructure… Abu Dhabi must intervene with full strength through its large financial resources to restore confidence and put the economy on the track of growth."
ADCED, which was established in 2006 to facilitate economic diversification and growth in Abu Dhabi, said the global crisis has hit almost all countries, including the UAE given its interdependence and integration into the world economy.
It cited direct and indirect effects on the UAE economy, including a sharp decline in oil prices, liquidity shortages, and a steady fall in the capital market. According to the study, such effects had already prompted action by the UAE Government, which pumped a total Dh120 billion in to the banking sector in the form of emergency funds, deposits and a three-year deposit guarantee. A further Dh16bn would be injected by the Abu Dhabi Government into five banks.
"While such measures have succeeded in offsetting liquidity shortages and ensuring continuance of normal bank lending operations, more should be done by Abu Dhabi or the UAE as a whole in order to enable the banking sector to fully recover and resume its role in supporting the domestic economy… this can be done through the country's massive financial reserves," it said.
The ADCED is headed by General Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme
Commander of the UAE Armed Forces.