The UAE's economy will gallop by 4.6 per cent in real terms this year and maintain its robust growth next year despite an expected decline in crude prices and production because of Iraq's gradual return to the oil market, according to a Western report.

The current account, the net balance between exports and imports of goods and services, transfers and investment income, is also forecast to record a high surplus although the UAE's imports are expected to sharply rise to meet reconstruction demand in Iraq.

The report by the Economist Intelligence Unit (EIU), an affiliate of the London-based Economist Group, also projected the UAE's crude oil export earnings to exceed $19 billion this year before they recede to around $14.1 billion next year.

UAE KEY INDICATORS
2001
2002
2003
2004
Real GDP growth (%)
3.5
1.8
4.6
4.4
Oil production (000 bpd)
2,158
1,990
2,230
2,115
Oil exports ($ m)
18,007
16,670
19,615
14,167
Current account balance ($ bln)
8.9
6.2
7.8
1.1
Current account balance (% GDP)
12.8
8.7
10.3
1.5
Exports ($ bln)
46.6
46
50.3
46.2
Imports ($ bln)
32.6
33.9
35.5
38.3
Source: EIU
Gulf News graphic
"The UAE's real gross domestic product expanded by around 1.8 per cent in 2002 and is expected to grow by 4.6 per cent this year and 4.4 per cent in 2004," it said.

"Regarding the current account balance, it recorded a surplus of nearly $6.2 billion (8.7 per cent of the GDP) last year and will likely record another surplus of $7.8 billion (10.3 per cent) this year…as for next year, the surplus will dive to nearly $1.1 billion or around 1.5 per cent of the GDP," said the report.

It gave no figures on the size of the GDP but, according to estimates by the Central Bank and the Ministry of Planning, it stood at Dh260.6 billion ($71 billion) last year, growing by around 2.5 per cent in nominal terms over 2001. The increase meant the UAE's GDP remained the second biggest Arab economy after that of Saudi Arabia.

Economists in the UAE said growth this year will be a result of strong oil prices, which are heading towards their highest level since the end of the oil boom 20 years ago. Independent estimates project their average through the year at more than $28 a barrel.

Another factor is the increase in the UAE's crude supplies, which are expected to average more than 2.2 million barrels per day, their highest ever. But output is expected to contract to around 2.1 million bpd this year, according to EIU.

"Apart from oil, there are other important factors, including the high government expenditure and an expansion in private sector investment….this is evident in the strong performance of many companies and banks this year," said a UAE banker.

Most banks and firms listed on the UAE stock markets have announced better results for the first half of this year and expect a better year through 2003.

EIU estimates showed the UAE's exports will rise from around $46 billion last year to $50.3 billion this year before slipping to $46.2 billion next year.

Imports will grow from $33.9 billion to $35.5 billion and surge to $38.3 billion next year.