UAE economy expected to expand by 3% this year

Abu Dhabi: The UAE economy is expected to expand by up to 3 per cent in 2010 while inflation for the year is seen at below 2 per cent, Minister of Economy Sultan Bin Saeed Al Mansouri said on Monday.

"The economy will grow this year between 2.5 per cent and 3 per cent, that's our expectation," Al Mansouri told reporters on the sidelines of an Emirates Securities and Commodities Authority (SCA) event.

"In 2010, the inflation will not cross 2 per cent."

The UAE is yet to officially announce its gross domestic product (GDP) figures for the 2009 financial year ended December 31.

The International Monetary Fund (IMF) has said the UAE economy contracted 0.7 per cent in 2009, a figure the UAE Central Bank governor said last week he would not dispute.

Al Mansouri said last year that inflation in the UAE stood at a low of 1.54 per cent — though many expected it to range anywhere between 3 per cent to 5 per cent for the year.

He cited the 2009 inflation figure as given by the National Statistics Centre.

Falling prices

"These are very good numbers. The cost of goods and services is going down, which will help the UAE in its strategy to reduce inflation," Al Mansouri said.

As regards the global financial downturn, he said: "We feel the challenges and problems all over the world in the economies have been identified. All over the world, the governments have taken action to resolve their problems."

"The UAE, as a whole, is relatively very small. The challenges here are being addressed in a very systematic and professional way. That's why, I am very optimistic that the economy will definitely grow this year," he added.

The IMF's latest report, however, lowered its 2010 GDP growth forecast for the UAE from 2.4 per cent to between zero and 1 per cent, citing continued instability in the Dubai real estate sector.

The fund said its calculations show the UAE economy contracted by 0.7 per cent in 2009 compared to an earlier projection of minus 0.2 per cent.

Abu Dhabi Mergers between brokerage firms will likely increase this year due to the current downturn prevailing in the UAE financial markets, Emirates Securities and Commodities Authority (SCA) chief executive officer Abdullah Al Turaifi said here yesterday.

Al Turaifi added that the downturn was forcing many brokerages to either withdraw or cancel their licences.

"The volume of trade in the markets is low and it is very difficult for some of them (to survive)," he said.

"[The] SCA is trying to support and assist them as we think... [However] small firms will not survive due to the [difficulties] they are facing in the financial market," Al Turaifi told reporters on the sidelines of an SCA event.

"We hope, this year, that financial markets will see a better situation and better performance from companies with more companies being listed," he added.

Al Turaifi said the SCA, the markets' regulator, will release some investment tools later this year for the financial markets. However, he would not elaborate any further.

Meanwhile, UAE Minister of Economy Sultan Bin Saeed Al Mansouri lauded the SCA at a ceremony to commemorate its 10 anniversary.

"The authority has played an active role in enhancing investor confidence, providing opportunities for investment in securities within the framework of a fair system that guarantees trading integration and accuracy in securities, and enabling these markets to be one of the basic foundations of the UAE's financial and economic stability as well as the centre of local and international investors' attention," he said.

Governance

Dr Nasser Saidi, chief economist at the Dubai International Financial Centre (DIFC) said: "It is now widely recognised that the underlying problem of [the] financial [downturn] was from governance, with failures occurring on the senior management, board, regulatory and supervisory levels."

"Learning from the financial [downturn], Gulf regulators need to ensure effective implementation in three key areas: transparency and disclosure, risk management and board practices," he added.