The government plans to increase federal spending next year in a bid to accelerate the economy's recovery from the global financial crisis. Education, health, social services and infrastructure will be among the sectors targeted by the Dh43.6 billion ($11.9bn) expenditure programme within the draft budget approved by the Government yesterday. It represents a 3.4 per cent increase on this year's spending. But the increase in the 2010 budget is significantly smaller than in previous years due to an easing of inflationary pressure since the financial crisis hit, say analysts. "Overall government spending will likely remain far more expansionary," said Monica Malik (CK), a senior economist at EFG-Hermes. The federal budget accounted for around 15 per cent of total government expenditure in the UAE, with the bulk occurring at the level of individual emirates, which are yet to announce their own budgets, she said. The 2010 budget will be balanced for a six consecutive year, the Ministry of Finance said, without specifying the oil price it had based its calculations on. Economic growth in the UAE has sharply decelerated due to a combination of the global crisis and low oil prices earlier in the year. In an effort to stimulate growth, a total of 22.5 per cent of the budget will be spent on the education sector including higher education, which has been highlighted as a key priority by the Government. Infrastructure projects will account for a further a 17.5 per cent of spending. A total of 6.4 per cent of the budget will go to health. "The social development sector has received the lion's share of the budget allocations for 2010," said the ministry in a statement. "The new budget aims to improve the level of services provided to citizens, in addition to giving priority to various projects in education, health and social services." The remainder of the budget will include Dh200 million in allocations to the Ministry of Interior for security spending. Funds are expected to be distributed to the Government's ministries next January. Last year, the Government said it raised 2009 state expenditure by 21 per cent to a record Dh42.2bn. "We expect that the overall spending of the individual emirates will remain strong," said Ms Malik. "Abu Dhabi is focusing on its investment drive, while spending in Dubai will be supported by its bond programme." EFG-Hermes is forecasting that consolidated spending, including expenditures by Abu Dhabi, Dubai and Sharjah, will increase by 18 per cent in 2010, down marginally from 20 per cent growth in 2009. Higher oil revenues has prompted the bank to forecast that the UAE's consolidated budget surplus will widen to 8.2 per cent of GDP next year, up from 7.3 per cent in 2009. Dubai, which has been impacted by a slowdown in its property sector, said in January it would run a budget deficit of Dh4.2bn this year, its first ever, as it increased spending to stimulate growth. The Central Bank in February bought $10bn of bonds issued by Dubai to support state companies struggling to raise finance during the global crisis. Economic performance has been aided by a rebound in the price of oil to around $80 a barrel. Minister of Economy, Sultan al Mansouri (CK) said last week he expected GDP growth of 1.3 per cent this year. tarnold@thenational.ae
