IMF predicts slower growth for the Emirates in 2012

Economic growth in the UAE is expected to fall back this year, says the IMF.

Limited room for raising oil output will mean economic growth in the UAE is likely to fall back to 2.3 per cent this year, the IMF has forecast.

Growth will decline from 4.9 per cent last year, said Harald Finger, chief of an IMF mission to the country, which concluded on Wednesday.

“The economic recovery looks set to continue,” he said.  “Real GDP growth reached an estimated 4.9 per cent in 2011, supported by increases in oil production.

Non-hydrocarbon growth also strengthened to around 2.7 per cent, backed by strong trade, tourism, and manufacturing, and despite continued oversupply in the real estate sector.”

Real non-oil GDP is projected to further strengthen to 3.5 per cent this year, he said.  But limited potential for further rises in oil production in the near term will mean overall GDP is expected to moderate to 2.3 per cent, he said.

The estimates are out of sync with UAE official estimates on growth.  Growth was estimated at about 3.3 per cent last year but could be higher, Sultan Al Mansouri, Minister of Economy, said earlier on Wednesday.  Growth was likely to be stronger this year, he said.

Inflation was likely to remain subdued at about 1.5 per cent this year, said Mr Finger.

Rockiness in the global economy could also pose challenges to the UAE, he said.
"The current uncertain global economic and financial environment poses a number of risks to this outlook," he said.

"The weak growth prospects in the advanced economies could lead to a pronounced decline in oil prices if regional geopolitical risks subside."

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