IMF projects UAE economy to grow 3.3% in 2011
Time:2011-06-27
The economic recovery in the United Arab Emirates (UAE) is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty, according to a report released by the International Monetary Fund on Monday.
The Washington based international lender projected that growth of real gross domestic product -- the broad measure of overall economy -- in the country to accelerate to 3.3 percent in 2011 from 2.1 percent in 2010, reflecting stronger tourism, logistics, and trade in the emirate of Dubai; and large public investment spending in the emirate of Abu Dhabi, including through Government- Related Entities (GREs).
Higher oil prices are also contributing to a marked improvement in the fiscal and external positions of the oil-rich Arabian country.
The IMF report noted despite higher international food prices, the inflation rate at consumer level is expected to remain moderate at 4.5 percent in the country, as property rents continue to decline. Besides, the UAE's unemployment rate is at low level of 4.2 percent.
However, the fund pointed out that risks to the country's economic recovery remain, including from possible economic spillovers of regional events. In particular, the current re- pricing of geopolitical risk in the region could lead to more challenging market conditions, which may put pressure on the entities that need to roll over external borrowing.
The IMF also warned that the excess supply of property in Dubai, and the uncertainty regarding the scale of oversupply in the emirate, will continue to weigh on growth in the UAE. The more than 100 percent of GDP, Dubai's GRE debt is large and roll-over needs are expected to remain substantial for the medium term, posing continued fiscal and financial risks to the UAE overall.
As for policy response to the still fragile recovery, the fund suggested the country focus on supporting domestic demand, and adjust to the economic spillovers from the unfolding regional events in the short term.
The Washington based international lender projected that growth of real gross domestic product -- the broad measure of overall economy -- in the country to accelerate to 3.3 percent in 2011 from 2.1 percent in 2010, reflecting stronger tourism, logistics, and trade in the emirate of Dubai; and large public investment spending in the emirate of Abu Dhabi, including through Government- Related Entities (GREs).
Higher oil prices are also contributing to a marked improvement in the fiscal and external positions of the oil-rich Arabian country.
The IMF report noted despite higher international food prices, the inflation rate at consumer level is expected to remain moderate at 4.5 percent in the country, as property rents continue to decline. Besides, the UAE's unemployment rate is at low level of 4.2 percent.
However, the fund pointed out that risks to the country's economic recovery remain, including from possible economic spillovers of regional events. In particular, the current re- pricing of geopolitical risk in the region could lead to more challenging market conditions, which may put pressure on the entities that need to roll over external borrowing.
The IMF also warned that the excess supply of property in Dubai, and the uncertainty regarding the scale of oversupply in the emirate, will continue to weigh on growth in the UAE. The more than 100 percent of GDP, Dubai's GRE debt is large and roll-over needs are expected to remain substantial for the medium term, posing continued fiscal and financial risks to the UAE overall.
As for policy response to the still fragile recovery, the fund suggested the country focus on supporting domestic demand, and adjust to the economic spillovers from the unfolding regional events in the short term.