UAE says it is less hurt by oil's fall than others

Dubai: The UAE will be "less afflicted" than other oil producers by falling prices due to its economic diversification, and the credit crisis won't halt infrastructure spending, the UAE's ambassador to the US said.

"We're well on our way to making sure that price fluctuations, whether they're big or small, do not affect the overall economic livelihood of the UAE," Yousuf Al Otaiba said yesterday in a Bloomberg News interview in New York.

Some 65 per cent of the UAE's gross domestic product (GDP) comes from industries other than oil and gas, a figure they hope to increase, Al Otaiba said. The UAE has budgeted for an average oil price this year of between $40 and $45 a barrel.

"They are very conservative estimates, and anything above that is considered a windfall," Al Otaiba said.

Crude oil for February delivery fell 93 cents, or 2.2 per cent, to settle at $41.70 a barrel at 2:44 p.m. on the New York Mercantile Exchange yesterday. Oil has fallen 72 per cent from its July 11 record $147.27 a barrel.

Gulf states, which had boomed on the back of record oil prices, are now struggling after prices tumbled.

The Gulf Cooperation Council (GCC), which groups Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain, pumps almost 20 per cent of the world's oil. Saudi Arabia's King Abdullah said in November that $75 a barrel was a fair price for oil.

The UAE's economy, which has enjoyed seven consecutive years of growth in excess of 2.5 per cent, will grow by three per cent in 2009, Al Otaiba said.

The global financial crisis will mean some real estate projects, such as Dubailand, a plan to make a three-billion square-foot leisure and tourism destination, will be "re-evaluated based on the financial situation in Dubai", Al Otaiba said. Other infrastructure projects should not be affected.

"All infrastructure programmes are going to continue on track," including cultural, educational and health programmes, the Dubai Metro, highways and energy, he said.

In real estate, there may be a "rational, logical downturn", as the markets "correct themselves", he said. "Prices were shooting very high, both in Dubai and Abu Dhabi, and what we've seen is a correction in how fast the prices increase."