Business | Economy
IMF projects modest growth for UAE
Expects GDP to grow 1.5% this year with a strong outlook for current account balances
- By Babu Das Augustine, Deputy Business Editor
- Published: 00:00 May 26, 2010
Dubai: The International Monetary Fund (IMF) has projected a 1.5 per cent gross domestic product (GDP) growth in 2010 for the UAE with a strong outlook for current account balances in its latest regional economic outlook.
"We have been conservative in our growth projections for the UAE. This is the base case scenario. Going forward we expect the economy to grow at a much faster pace," IMF Middle East and Central Asia Director Masoud Ahmad.
The IMF has forecast GDP to grow 3.1 per cent in 2011 with the overall econ-omic recovery picking pace in the second half of this year.
The IMF report said that the non-oil segment of the economy was quick to recover last year from the impact of the global financial crisis. With oil prices gaining, the UAE is projected to post a current account surplus of $19.7 billion in 2010 against a deficit of $7 billion last year.
"We expect the Abu Dhabi economy to grow 3.4 per cent this year. As for Dubai we expect the economy to contract by 0.5 per cent this year. Clearly, the clarity on Dubai World's debt-restructuring is going to have its upside on Dubai's growth prospects," Ahmad said.
Commenting on the IMF outlook for the UAE and Dubai, Khatija Haque, vice-president of Research at Shuaa Capital, said that improving oil prices are expected to lift the economic prospects of the country in the near term while strong infrastructure spending and improving global trade will speed up Dubai's recovery.
"With the Dubai World debt issue behind us, we expect business confidence to improve and the clear sliver lining for Dubai's economy is that Dubai's debt is mostly linked to its infrastructure that is going to be a key growth driver of the future," Haque said.
Despite the conservative IMF forecast, economists said that the worst seems to be over for Dubai's economy. "Most of the job losses associated with the downturn happened in the first quarter of 2009 and there has been a clear stabilistion in the economy," Marios Maratheftis, an economist with Standard Chartered, said.
Improving prospects
The IMF has said the prospects of countries of the Middle East and North Africa have improved with the resumption of capital inflows and rising crude oil prices. But stress in the banking and financial sectors along with slow credit activity are weighing on the rebound.
The report sees a strong recovery for the region in the coming year, aided by an increase in capital inflows and crude oil prices.
The oil exporting countries from the Middle East region are expected to see a strong recovery in current account balances.
Their combined current account surplus fell to $53 billion in 2009, after having reached $362 billion in 2008.
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