IMF says UAE to return to growth

A report from the IMF says the national economy will shrink less than expected this year and see growth again next year.

The UAE economy will shrink less than expected this year and return to growth in 2010, according to a new forecast by the IMF. The IMF now expects the economy to contract by about 0.2 per cent instead of the 0.6 per cent it had forecast earlier this year, because of the strengthening price of oil in recent months. Crude prices have risen to about $67 a barrel from a five-year low of $32.40 a barrel in December.

The country is expected to return to positive growth next year, with the economy likely to expand by 2.4 per cent, according to the IMF report, published today. The UAE's GDP was expected to continue to expand, increasing by as much as 5.2 per cent in 2014, said the report said. Growth in the UAE, the GCC's second-largest economy after Saudi Arabia, has slowed as a result of the global recession and a decline in oil prices from historic highs of $147 a barrel last year.

Among oil exporters in the Middle East, the UAE has been most affected by its links to global trade and financial markets and by a fall in property prices, the report said. Dubai has been particularly impacted by the correction in asset prices that started in the second quarter of last year, it said. A shortage of bank credit to the private sector, which dried up after the financial sector problems, has been sapping the strength of the recovery in Dubai and also in Bahrain, another important financial centre in the region, the report said.

Soaring oil prices contributed to the UAE posting 7.4 per cent GDP growth last year. The IMF increased its economic growth forecast for the Middle East for next year to 4.2 per cent, from 3.7 per cent after the oil price rise. [e-mail]