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14 April 2024

UAE may grow 2% in 2010, slower than in Mena

By Waheed Abbas

The UAE economy had contracted nearly two per cent last year but will bounce back this year and grow slightly more than two per cent, said Jan Randolph, Director of Sovereign Risk, IHS Global Insight.

The forecast is closer to the Minister of Economy Sultan bin Saeed Al Mansouri's estimates of 2.5-3 per cent announced on Monday.

Speaking at a conference in Dubai yesterday, the London-based analyst projected positive growth for the Mena region and said the region will rebound between four and 4.5 per cent this year.

The region's real GDP grew nearly two per cent in 2009 and will jump to more than four per cent this year, according to the forecast.

The global advisory firm said the inflation remains tame and rising surpluses leading rebound and fiscal supports are buttressing the recovery.

Randolph said Gulf fiscal support will last longer than in the West and the region's exit strategies will also be adopted later.

It said the regional countries drew down foreign exchange reserves build up during the boom period.

The firm said Saudi Arabia had approximately $220 billion (Dh808bn) in foreign exchange reserves during pre-crisis period and exhausted around $70bn during the crisis.

On sovereign ratings in the Mena region, he said they are holding up well amidst the global financial crisis and there was no sovereign downgrade. In fact, the ratings of Saudi Arabia, Libya and Lebanon were upgraded recently, he said.

Saudi Arabia's credit rating was raised by Moody's Investors Service on Monday, citing "strong" government finances that have withstood volatile oil prices and the global recession, but rating still remains below the UAE, Qatar and Kuwait. Even on the global level, ratings have stopped deteriorating.

"The regional countries' outlooks are shifting back to positive slowly and the region already enjoys more positive outlooks than the negative ones," he said, adding that the US dollar will weaken in the post-crisis period but unlikely to collapse.

On the global economy, he said "Great Depression 2.0" has been averted but with deep scars of debt. "It is better to prevent bubbles than let them happen and clean up the mess after they burst."

He said leading indicators are improving across region and financial markets have stabilised but credit still remains tight. The speed of regional recoveries will vary, he said.


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