IMF doubles UAE growth projections

Dubai: The UAE's gross domestic product (GDP) is expected to grow 2.4 per cent this year, a strong turnaround from its 2.5 per cent decline last year, according to the International Monetary Fund (IMF) Wednesday.

This is nearly double the earlier projection of 1.3 per cent for the UAE economy by the IMF and close to a projection by the UAE Ministry of Economy of about 2.5 per cent.

The latest edition of the IMF's half yearly status report, Global Economic Prospects (GEP), also projected 3.2 per cent GDP growth for the UAE in 2011.

Aroop Zutshi, President and Managing Partner of Frost & Sullivan, a global research and consultancy company, said the UAE economy may expand 3 per cent this year and 4 to 4.5 per cent in 2011.

"The UAE is showing initial signs of recovery from the global recession. I think it is sustainable," Zutshi told reporters in Abu Dhabi on the sidelines of a conference. Although the IMF doubled its growth projections for the Middle East and North Africa (Mena) region's economies to 4.1 per cent this year, up from 2 per cent in 2009, challenges remain.

Corporate defaults

Prominent corporate defaults in Dubai, Kuwait and Saudi Arabia have contributed to increased uncertainty about the health of the corporate sector, the IMF said. "The spill-over from these episodes to broader lending conditions in other MENA economies, however, has thus far been limited — possibly due to relatively rapid and orderly restructuring.

"The decline in external sources of funds, along with slow deposit growth, has nevertheless curtailed the ability of banks to extend loans," Oliver Blanchard, the IMF's economic counsellor, said.

Zutshi said in the US, fourth quarter GDP growth is expected to be significantly better than in the corresponding period a year earlier, due to an increase in consumer spending.

"This is going to have a ripple effect in Europe and the Middle East," said Zutshi.

He said around 80 million cars are going to be on the roads worldwide in the next 2-3 years, which is going to boost the world demand for oil, the mainstay of the region's economy.

The Gulf Arab region exports the bulk of its oil production. "Oil and gas, petrochemicals, metals, minerals, water and power are going to be the drivers of the UAE's economic growth in 2011," said Zutshi.