UAE economy will be unscathed by global crisis

Dubai: The UAE economy will emerge largely unscathed from the global fin-ancial crisis but growth will decline after years of "euphoric" sentiment, Standard Chartered Bank economists said on Monday.

Being a major oil exporter, the country is seen in a better position than most nations to weather the current global economic storm.

Unlike the debt-dependent economies of the US, Britain and several European nations, the UAE enjoys a huge current account surplus and has been a net exporter of capital.

Marios Maratheftis, regional head of research at Standard Chartered, expects the UAE economy to grow next year at 2.7 per cent in real terms compared with a projected growth of 4.8 per cent in 2008.

"This rate might sound low to most people, but if you compare with what is happening in the West, it is something that we should be happy with in the UAE," Maratheftis said during a media briefing on the global economic crisis.

He provided a bleaker view of growth in Western countries.

"We do not expect Western economies to rebound anytime soon, not in the next few years at least," he said.

Current account surpluses that have exceeded 20 per cent for Gulf countries on the back of high oil prices can be used for accelerating economic activity in case of a significant slowdown due to fall in foreign investment and trade reduction.

"These surpluses suggest that even though it is good to have foreign investment, we are not dependent on them. We are net lenders in the world, we are not net borrowers. This is providing us a very healthy cushion to grow," Maratheftis said about the UAE's economic outlook.

Global demand

Standard Chartered expects oil prices to remain much high despite recent price drops due to fears of slower global demand and the US dollar gaining some of its strength.

Alex Barrett, global head of client research at the bank, sees countries such as the UAE benefitting from "this huge shift in economic and financial power from the West to the East".

He said "clear winners" in the developing world are going to be the countries with current account surpluses and domestic savings.