Construction and development activities in Abu Dhabi in full swing. A thriving tourism market is a significant contributor to the nation’s gross domestic product. Image Credit: Hadrian Hernandez/Gulf News archive

Dubai: The UAE economy is likely to slowdown 3 per cent this year, due to a combination of external factors including lower oil price, Eurozone crisis and gloomy outlook of global economy, from a 4.2 per cent growth recorded last year, a top UAE official said.

As the UAE economy integrate with the global growth, its reliance on other markets also increases.

“All indications including oil price, Chinese economic slowdown and the Eurozone economic crisis are contributing to the UAE’s growth as it is an integrated in the world economy,” Sultan Bin Saeed Al Mansouri, UAE Minister of Economy, told reporters.

Meanwhile, a steady flow of liquidity and high oil price has helped the UAE to post a 4.2 per cent growth in its Gross Domestic Product (GDP), Al Mansouri said.

The UAE’s nominal gross domestic product last year reached Dh1.24 trillion, up from Dh1.04 trillion recorded in 2010, the government’s data released yesterday, showed.

Since the UAE is an open economy, Al Mansouri remarked that the UAE economic performance would be better if the economic situation in Europe and US was better.

The rate of inflation recorded in 2011 by 0.88 almost same rate in 2010. “The rate of inflation is projected to be managed at 1.5 per cent maximum by end-2012 however this would be subject to the oil price and the world economy.”

The inflation adjusted real GDP, however, reached Dh981.6 billion, up from Dh942 billion.

Al Mansouri said, “We are in a unique situation at a time when we are growing while the global economy is still facing challenges.

“Our economy is backed by good performance of different sectors, such as trade which contributed by 13.5 per cent to the GDP, logistics and a surging tourism sector contributed by 8 per cent.”

He said, the country’s economy has recovered from the worst financial crisis in 70 years, due to its integration with the global economy.

He added that despite the continued weakness of the construction and real estate sectors in the aftermath of the 2009, these sectors still contribute 10 per cent to the GDP.

Al Mansouri highlighted that the government had earlier set a target for economic growth between 4 to 5 per cent.

“Fluctuation is not good in any economy and proper clear plan should be in place to achieve steady growth,” he said.

The non-oil sector’s contribution to the UAE’s GDP has fallen to 61.6 per cent last year, not because of a decline in the economic sectors’ performance but because of the surging oil price.

Global crude oil price has surged to $120 per barrel in the first four month in 2012. However, Al Mansouri said, he expected the oil price to stabilise at $100 that would be ideal for a sustainable economic growth.

Dr. Mohammad Al Assomi, a UAE economist told Gulf News, “This growth highlights the contribution of the various non-oil sectors with manufacturing, construction, retail, real estate, financial services and tourism, among others, being significant contributors.

“The global economic recovery had further strengthen the performance of the non-oil sectors, and our expected growth rate will be higher than that of other high-income industrialised nations,” he added.

Dr. Abdulhameed Radwan, UAE-based economist, said that financial stability. The banking system maintains significant buffers to withstand a further deterioration in asset quality and external liquidity conditions.

He also remarked that the UAE has been reaping the benefits of its early efforts to diversify the economy. “It is remarked that its dependency on oil exports declined markedly. Based on its well-developed hospitality and services sectors, tourism, transportation,” he said.


The Iran Factor

While the UAE economy has increased in terms of its relationship to the external economy as exports grew by 30.7%, Al Mansouri remarked that the UAE-Iran trade has been affected by the sanctions.

“Despite that the trade between the UAE and Iran is almost based on consumer’s products but it has been affected a lot by the financial embargo and the business community is complaining.”