The Minister of Economy expects growth this year to be at the lower end of earlier forecasts but remains positive about the economic outlook. Sultan al Mansouri said the country had sufficient reason to be confident about the economy in the second half of the year. "It is clear skies after the overcast conditions that followed the global economic crisis," he said in a speech on Sunday. "Green shoots are visible all over and the outlook is essentially positive."
Mr al Mansouri said in May GDP expansion would be between 2 and 3.2 per cent this year, with the higher figure more likely if oil prices averaged US$85 for the year. "The average we like to talk about for the year 2010 is 2.25 per cent," he said during his speech at a Dubai Chamber of Commerce and Industry suhoor. An expected 4.5 per cent increase in demand for oil in the Middle East this year had helped to support a wider rise in demand internationally, he said.
Oil yesterday traded at about $75 after dropping from highs of about $85 in April due to concerns about the outlook for the global economy. Production cuts by OPEC members meant GDP growth in the UAE would be almost entirely driven by the non-oil sector this year, said Giyas Gokkent, the chief economist at National Bank of Abu Dhabi. "In the UAE we are looking at two-tier growth as there is activity in Abu Dhabi but the rest of the country is looking flattish," said Mr Gokkent.
He forecasts growth of 2.8 per cent this year, with real GDP coming from non-oil sectors such as property, construction and services. He said growth would accelerate next year if oil production increased as a result of loosening OPEC restrictions. Expansionary fiscal and monetary policies of the Federal Government had helped to maintain aggregate demand after the financial crisis, said Mr al Mansouri. Declines in investment and consumer expenditure due to a shortage of liquidity in the first quarter had been offset by significant increases in government expenditure.
A longer recovery period in the property sector meant it had begun to shift from an important driver of the economy to an enabler, he said. "This switch, especially in Dubai, brought more focus on trade, logistics and services ? as evidenced by the strong recoveries in the trade, logistics and tourism sectors," he said. Preparations were under way to launch 12 laws to update the country's existing business and commercial legal framework, which dates back 25 years in some areas.
The companies law would make it mandatory for firms in the UAE to establish a general corporate governance framework to protect shareholders' rights and improve transparency, Mr al Mansouri said. Having been discussed by the ministerial legal committee and sent to the cabinet for approval, the legislation is expected before the end of the year, he said. A competition law, which has also been sent to the Cabinet, would encourage competition and curb monopoly practices in line with recent recommendations from the World Trade Organisation.
A draft arbitration law, which would provide guarantees to investors in the event of dispute settlements, has been finalised. An industry law encouraging small and medium industries and protecting UAE products from the dumping of cheap international exports is at the planning stage, along with an auditors law, industrial ownership law, certificate of origin law and an anti-fraud law. "All these laws being drafted encompass lessons from the past, realities of the present and goals for the future," he said.