'Revival onus with government'

Dubai: The UAE Federal Government should take a lead in reviving the country's economy, in case of a further slowdown, Dubai Chamber of Commerce and Industry said in its latest report.

The Economic Bulletin stated: "If the UAE economy goes through a period of slowdown due to the turmoil in the world markets, then the burden of reviving the economy lies on the government."

The UAE economy is showing signs of slowing down due to the impact of the global economic downturn and lower oil prices - which fell to $36 (Dh132.4) a barrel yesterday. In response, economic forecast analysts have revised their figures for the UAE.

The Economist Intelligence Unit (EIU) has downgraded its forecast of UAE GDP growth to 1.5 per cent this year, before recovering to 4.7 per cent in 2010.

Of the seven emirates, Dubai has been by far the most open towards liberalising its economy and is much more leveraged than the other emirates, with heavy investments in the real estate and financial sectors.

David Butter, the regional director for the Middle East at EIU, said: "Debt was a more important part in Dubai's growth."

The DCCI bulletin stressed the importance of government initiatives to spur growth with demand- side factors, particularly to bolster investment - and more importantly - private sector investment.

"The lesson to be learned from the Great Depression of the 1930s is that the US government at the time did not play an active role in pre-empting the economic slowdown", the DCCI bulletin said.

The chamber's report suggests that initiatives could include "an expansionary monetary policy" and "easy credit" with low interest rate, which "may put a huge burden on government budget in the short run, but will pay off in the medium and long terms."

Authorities have hinted at possible measures. Federal-level public spending has been increased by 21 per cent to Dh42.2 billion, while Dubai's 2009 budget this week announced a 42 per cent increase in spending to stimulate growth and reassure business interests, with a chunk of extra spending set aside for infrastructure.

"Whether such forecasts are achievable will depend largely on the spillover into the region from the global economic crisis and on the continued efforts of the governments to bolster confidence and implement measures to attract and increase private and foreign, investment," analysts say.

At the national level, the Central Bank has become more actively involved in the monitoring of the economy and is working more actively with the finance and economy ministries to oversee government funding for the banking sector.

However, pressure to do more is increasing.