The UAE's economy edged up slightly in 2009 but is projected to rebound by up to three per cent in 2010 because of anti-crisis measures and growth in non-oil sectors, said Minister of Economy Sultan Al Mansouri.
His forecasts for 2010 are sharply higher than projections by the International Monetary Fund (IMF) that the country's real GDP would expand by just 0-1 per cent, far lower than the IMF's previous forecasts of 2.4 per cent. Mansouri cited higher oil prices and prompt counter-crisis measures by the UAE for the recovery in the domestic economy this year and positive growth in 2009.
He also said that inflation in the UAE tumbled to just 1.5 per cent in 2009 from a record annual rate of 12.3 per cent in the previous year.
"We are very positive about the domestic economy in 2010… as you know challenges and problems resulting from the global financial crisis are all over the world not only the UAE," Mansouri told reporters at a conference marking the 10th anniversary of the establishment of the Securities and Commodities Authority.
"All these problems have been identified and authorities around the world are taking action and measures to resolve these problems.
"In the UAE, if you look at its economy, it is relatively small compared with global economies but these problems here have been addressed in a systematic and professional way… that's why I am very optimistic about the economy, which we expect to grow roughly by between 2.5 and three per cent this year, aided by higher oil prides. But, of course, all this depends on many factors through the year."
Mansouri said the UAE's real GDP, the second-largest Arab economy after Saudi Arabia, recorded positive growth in 2009, contrary to IMF projections, which showed the GDP shrank by around 0.7 per cent last year.
"I can assure you there was positive growth last year. It is small but positive. We recorded growth despite the sharp cut in oil production and lower crude prices… this was a result of a steady expansion in the non-oil economy, which reflects the success of the country's diversification programmes."
Asked about inflation, Mansouri said the rate dipped from a record high annual level of 12.3 per cent to only around 1.5 per cent, the lowest in nearly 10 years.
"These are very good figures, which show the cost of living in the UAE is declining rapidly… this is a very positive factor for the economy."
In 2008, the UAE economy recorded one of its highest real growth of 7.4 per cent despite a sharp fall in oil prices in the fourth quarter due to the global crisis.
According to the Central Bank, high growth was a result of strong oil prices in the first half of 2008 and measures taken by the government in the second half to counter the effects of the crisis. The rate was higher than the 5.3 per cent real growth recorded in 2007 but far lower than the 11.6 per cent rate in 2006.
No talks on rejoining Monetary Union
The UAE is not discussing whether to rejoin the planned Gulf monetary union at this point, the Central Bank Governor Sultan Nasser Al Suweidi said yesterday.
The second-largest Arab economy pulled out of the project in May 2009, three years after Oman did the same, in protest against a decision to site the joint central bank in Saudi Arabia.
"Well, this is an issue, which is not being discussed yet at this point," he told reporters. Only Saudi Arabia, Kuwait, Qatar and Bahrain are now pushing ahead with the union.
Kuwait made bringing the UAE and Oman back a priority of its presidency. Oman has said it did not plan to come back at any time in the future.
Muhammad Al Jasser, Governor of the Saudi Arabian Monetary Agency (Sama), said he had not lost hope of Oman and the UAE returning to the fold.
Gulf Arab central bank governors will hold the first meeting of their joint monetary council on March 30, the next step towards monetary union, the head of the Gulf Co-operation Council said on February 9.
The governors of the four Gulf states planning monetary union will discuss legal and administrative issues in order "to speed up the single currency", said Abdulrahman Al Attiyah, the bloc's Secretary-General.
Central Bank to discuss Eibor
UAE interbank offered rates do not reflect true market lending rates and the central bank will consult banks and make proposals on how to reduce them, said a Central Bank official.
The Emirates Interbank Offered Rates (Eibor) have been edging up in recent weeks, touching six-month highs as some banks pushed them higher in competition for deposits.
"It [Eibor] does not reflect true market rates, so this is going to be discussed thoroughly at our next meeting with commercial banks," said Saif Hadef Al Shamsi, Senior Executive Director at the Central Bank's Treasury Department.
"There are some demands from banks and the central bank will come up with some proposals at the next meeting on how to bring the rates down," he said on the sidelines of an event.
Shamsi said the meeting would take place soon but did not give details. The benchmark UAE three-month rate was fixed at 2.17 per cent yesterday, up from 1.89 per cent a month ago, with rates ranging from as low as 1.20 per cent to 2.50 per cent. The Saudi benchmark was at 0.7675 per cent yesterday.
In September, the UAE Central Bank rejigged the panel of providers for the Eibor and altered the formula used to calculate it, aiming to bring rates down and boost lending.
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