Lower oil prices and production, allied with a sharp fall in bank credit to commerce and other sectors, depressed the UAE's trade surplus by about 59 per cent in 2009 after hitting a record high level in 2008, official data showed yesterday.
From a peak of about $63.5 billion (Dh233bn) in 2008, the surplus in the country's trade balance dived to about $25.8bn (Dh94.6bn), a decline of nearly 59.3 per cent, showed the figures by the Arab Monetary Fund (AMF).
The fall turned the UAE's current account surplus of about 8.8 per cent of GDP in 2008 into a deficit of nearly 2.7 per cent, said the Abu Dhabi-based fund, the Arab League's main financial establishment. "The sharp fall in the trade surplus turned a large current account surplus in 2008 into a deficit… the fall in the trade balance was caused by a large decline of nearly 32 per cent in the UAE's exports last year," the AMF said.
Its figures, based on UAE Government statistics, showed the country's total exports of goods slumped to nearly $163bn in 2009 from a record $239.8bn in 2008.
The report cited a sharp slowdown in bank credit and lower oil prices and output by the UAE for the large decline in exports last year.
Oil prices tumbled by about 35 per cent to an average $62 in 2009 from a record high of $95 in 2008 after oil demand was hit by the global fiscal crisis.
The UAE's crude output is also believed to have dipped by nearly 10 per cent to an average 2.25 million barrels per day last year from 2.5 million bpd in 2008.
The drop was coupled with a sharp slowdown in credits by the country's 24 national banks and 28 foreign units because of the crisis and a debt default problem involving the Saudi Saad and Algosaibi family conglomerates.
Central Bank and AMF data showed growth in bank credit to the private sector plummeted from a record 49.3 per cent in 2008 to only about 1.9 per cent in 2009 to reach nearly Dh892bn by the end of the year.
The slowdown in credit has hit most non-oil sectors in the UAE, mainly trade, construction, real estate and personal loans.
Analysts said slackening bank credit has sharply stifled growth in the domestic economy but added this was partly offset by a large rise in public spending.
"The UAE economy could have plunged steeply in 2009 but it was cushioned by heavy public spending as part of the government's stimulus plan that followed the global financial crisis," said an economist at an Abu Dhabi bank.
Public expenditure in the UAE hit a record high of Dh289bn in 2009 despite a steep drop in oil revenue to about Dh217.5bn from Dh450.3bn in 2008. Besides oil and non-hydrocarbon revenue, the UAE's consolidated budget is supported by massive foreign assets controlled by the Abu Dhabi Investment Authority, believed to be the world's largest sovereign wealth fund.
Despite the decline last year, the UAE was the largest exporter in the Arab World after overtaking Saudi Arabia, according to the Kuwaiti-based Inter-Arab Investment Guarantee Corporation, another key Arab League institution.