Plunging oil prices will not have an effect on this year’s federal budget, according to the Minister of Economy.
Oil and gas accounts for 40 per cent of the country's GDP, and the economy is expected to grow at between 4 and 4.5 per cent this year.
“We have diversified the economy in the last 42 years, and while it will not have any immediate impact on the federal budget, it will eventually in the next two to three years,” Sultan Al Mansouri, the Minister of Economy, said on the sidelines of a new factory opening in Dubai.
“However, my expectations are that the prices will stabilise in the next six months to a year.”
He expects cheaper oil to enhance sluggish economic growth, especially in China and other emerging countries.
Prices of Brent crude have been falling since last June as rising supplies outstripped demand growth and Opec continued to maintain its production level. Brent yesterday was trading at $49.81 a barrel at 4:18pm UAE time.
The UAE produced an average of 2.9 million barrels per day last month, up by 153,000 bpd from November, it reported to Opec last week.
Opec's overall output rose by 80,000 bpd last month to 30.48 million bpd, led by a surge in Iraqi supply that touched a 35-year record.
“How low the market’s floor will be is anybody’s guess. But the sell-off is having an impact,” the International Energy Agency, the Paris-based energy watchdog, said in a report on Friday. “A price recovery – barring any major disruption – may not be imminent, but signs are mounting that the tide will turn.”
Despite record buys from China to build its stockpile, sluggish growth in economies continued to suppress the demand for oil.
“The net result of these changes is that implied stock builds are set to continue through the first half of this year, albeit at a marginally lower rate than previously expected,” according to the report.
Last month, China bought 30.4 million tonnes, or 7.19 million bpd, up from its previous record of 6.81 million bpd in April.
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