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15 April 2024

'UAE better placed to weather crisis'

An expert says the UAE is lucky because it does not have a huge deficit. (JOSEPH J CAPELLAN)

By Abdel Hai Mohamad

Abu Dhabi Economic Forum concluded yesterday with experts stressing that the UAE will be among the region's top countries to weather the fallout of the global financial crisis.

They highlighted the strength of the country's economy, adding that it continues to achieve positive growth rates.

They urged the government to spend more, especially on infrastructure projects, to open new fields for investment and redouble efforts to attract investments.

Simon Williams, Chief Economist, Gulf Markets, HSBC Bank Middle East, said the UAE in particular and the Gulf in general are lucky since they do not suffer big deficit in their budgets which other countries such as the United States and Britain do.

Also they still spend from the huge liquidity surplus available. Williams urged the UAE to spend more and to support the share markets in particular and not to think of closing those markets at all.

Most certainly the country is still far from the bad and negative image suffered by economies of most advanced countries. But it should be ready for any sudden changes, he said.

"I do not see economies collapsing, but volatile markets. And I see that Abu Dhabi in particular is capable of avoiding volatility experienced by economies of the world. Rather its economy is prospering and the situation is good. The situation is good and not difficult."

Vice-President Morgan Stanley Mohamed Jabber said the world and the UAE will soon be out of the chaos caused by the global financial crisis. "The world economy will gradually recover before the end of the year to enter the stability phase by 2010. And China will be the first to be out of the crisis."

Jabber said the speed of escaping the crisis will be linked to getting rid of three negative elements: how to break the chain of reliance on loans which have weakened the banking sector. Second is how to end unemployment and bring down consumer spending. Theses two have weakened the economy. And third is how to break the link to the US, which is now weak.

CEO Shuaa Securities Mohammed Ali Yasin said the economic situation of the UAE is totally different from that of the United States.

"The UAE had been making a big economic leap for years, while America has been suffering from the beginnings of the crisis."

The UAE Government has the ability to make sound decisions, which happened over the past few months. But the biggest problem is fear, and "if we put fear aside, we would be able to attract more liquidity."

Yasin said UAE banks are still strong and their classification has not retreated. He said the position of companies is still good.

Emaar for instance will this year make four times the profit it made during the fourth quarter of last year. Profits will reach Dh3.6 billion, at a growth rate of 20 per cent compared to 2008.

"No doubt we have gaps and fallout because of the crisis, but we also have a strong potential to overcome them and to develop our markets. We have to maintain the growth."

Yasin said demand for real estate property in Abu Dhabi is expected to drop by 30 per cent, and rents are also expected to go down by the same percentage.

The market will go back to stability when prices retreat by 70 per cent since previously announced prices were highly exaggerated.

Chief Economist and Co-Head of Asset Management Group, National Bank of Abu Dhabi Giyas Gokkent said government intervention to provide liquidity for the banking sector was a successful and highly distinguished step.

He said the rate of growth of banking operations in the UAE still has not been impacted by the global financial crisis and those operations still achieve a ten per cent growth, which is big.