UAE economy could expand 5% in 2010

Dubai: The UAE is poised to make a strong comeback from the nearly flat growth it experienced last year and growth next year will be more sustainable compared to the boom of 2008, according latest projections.

“We are seeing a fundamentally strong recovery taking shape in the Gulf region with the UAE and Saudi Arabia leading the trend. We estimate Dubai will grow about 3 per cent next year and the UAE economy as a whole will experience about 5 per cent growth,” said Marios Maratheftis, Regional Head of Research at Standard Chartered.

Unlike the boom of 2008, UAE growth next year will be driven by investments in productive sectors such as infrastructure and small and medium enterprises.

“This recovery is the result of strong fiscal spending. We believe it is sustainable because it is not liquidity-driven or due to excessive investment in real estate,” said Maratheftis.

Standard Chartered estimates the Gulf region along with emerging markets will be at the forefront of the global recovery.

“The recovery is going to be a slow process in the US and the western economies, however we do not see the possibility of a double dip recession. The Gulf and East Asia will be way ahead on the recovery path,” said Gerard Lyons, chief economist of Standard Chartered.

The International Monetary Fund and other independent economists have predicted the UAE will grow 2 to 3 per cent in 2010, so Standard Chartered’s estimate is the highest independent estimate.

Best-positioned

“We believe the UAE is best-positioned in the region to benefit from the pick-up in global economic activity. The region-specific concerns have started to ease,” said Turker Hamzaoglu, economist with Bank of America Merrill Lynch.

While UAE inflation in 2010 is expected to be 6 per cent, economists cautioned against the medium term possibility of global capital inflows into the country resulting in higher inflation.

“What was good for the US in 2009 was good for the UAE and the rest of the Gulf. We are recovering at a faster pace than the US, thus the lower cost of money transmitted through the peg could result in higher inflation,” said Maratheftis.

As the economy bounces back, do you expect a repeat in inflation pressures? Do you think prices will increase?