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24 April 2024

UAE not headed into recession right now: Cenbank

Central Bank Governor Sultan Nasser al-Suweidi says the UAE will still experience single-digit growth in 2009. (FILE)

By Reuters
The United Arab Emirates is not headed into a recession for now, the Gulf state's central bank governor said on Wednesday, saying the oil producer expected to achieve low economic growth this year.

An economic boom in the UAE, the world's fifth-largest oil exporter, came to an end late last year as oil prices collapsed more than $100 a barrel, regional credit markets froze and a building boom in the emirate of Dubai started to unravel.

Asked whether a recession was in store, Sultan Nasser al-Suweidi said, "At this point in time, no."

"The economy will only see low single-digit growth in 2009," he said in Abu Dhabi.

Economists have been slashing their economic growth forecasts for Gulf Arab countries as the region suffers from the fallout of the global financial crisis. Many have cut growth forecasts for 2009 to less than 1 per cent.

But while Dubai is suffering from a sharp property market downturn that has led to scores of jobs losses, analysts have said Abu Dhabi -- home to more than 90 per cent of UAE oil reserves -- may fare better.

Abu Dhabi said earlier this month it was aiming for 7 per cent annual economic growth through to 2015 by developing its non-oil sector, with the aim of lowering the oil sector's contribution to the emirate's economy to 44 per cent by 2020.

Asked when he expected an economic recovery in the country, Suweidi said: "It depends on circumstances because things are changing and evolving." The UAE central bank cut interest rates by 50 basis points this week to shore up the economy.

Still, last month, the governor said he expected credit growth in the UAE -- which had about doubled in the four years to 2008 -- to slow to no more than 10 per cent this year as banks adopt more caution in extending new loans.

The property sector downturn and job losses have raised the risk of customers defaulting on mortgage and consumer loans.

Suweidi said the central bank would request that banks set aside funds to cover for potential write-downs if banks unveil non-performing assets.

"We will wait until we see the examination and if there are, then we will ask for provisions," he said.