The UAE economy soared by nearly 13.9 per cent to surpass the Dh800-billion-mark for the first time despite a sharp decline in oil prices in the last quarter of the year, semi-official estimates showed yesterday.
Both the hydrocarbon and non-oil sector contributed to the growth which the report said showed the UAE has the potential to withstand lower crude prices and the repercussions of the devastating global financial crisis.
From around Dh703bn in 2007, the country's nominal gross domestic product (GDP) surged by nearly13.9 per cent to Dh801 billion in 2008, said the report by the government-controlled Emirates Industrial Bank (EIB).
Its figures showed the oil sector jumped by 24.2 per cent to Dh305.5bn from Dh246bn while the non-oil sector swelled by around 8.4 per cent to Dh495.5bn from nearly Dh457bn in the same period.
"Achieving high growth rates despite the sharp decline in oil prices towards the end of 2008 is in itself a very good development as this demonstrates the strength of the UAE economy and its ability to overcome any repercussions of the global economic crisis," EIB said in its January economic bulletin. "This of course will allow the UAE to deal with any developments in 2009."
The report gave no breakdown of the GDP components apart from the manufacturing sector, which it expected to have grown by 13.5 per cent in 2008 to around Dh99bn from Dh87.2bn to maintain its contribution to the overall GDP at nearly 12.4 per cent, almost unchanged from 2007.
"Besides high growth, we expect that the decline in oil prices, the relative stability in local rents and the drop in global prices will lead to lower inflation rates in the UAE and this will of course positively impact living standards in 2009," it said.
EIB's projections are almost equivalent to recent forecasts by the Abu Dhabi Chamber of Commerce and Industry, which expected the GDP to grow by around 14.7 per cent to Dh800.3 billion in 2008. Both reports gave no figures on real growth but economists put it at around five to six per cent in 2008 and expected it to be slightly lower in 2009.
"As for 2009, there will be real growth in non-oil sectors but lower than the rate in 2008. I expect growth to be around four per cent. I cannot comment on the oil sector because it depends on the movement of oil prices and the UAE production. This means it is too early to predict growth in the UAE's GDP for next year," said Mohammed Asumi, a well-known Gulf economist.
Besides strong oil prices, the UAE economic growth was fuelled by a surge in construction projects, good banking performance in the first half, and an expected rise in gross fixed capital formation to a record Dh143bn in 2008 from Dh123.7bn in 2007, according to the Ministry of Economy.
The financial sector was also a good performer in 2008, with the current account surplus projected to soar to more than Dh150bn after hitting a record high of Dh135bn in 2007, Central Bank estimates showed.
Figures by the US Energy Information Administration showed the UAE earned a record $88bn (Dh323bn) from oil exports in the first 11 months of 2008 and the income could exceed Dh330bn by the end of the year.
Strong economic performance in 2007 was accompanied with a surge in inflation in the UAE to a record 11.1 per cent. But the rate could be lower in 2008 following a decline in global prices and strengthening in the US dollar.