UAE GDP
United Arab Emirates GDP– AN OVERVIEW
UAE GDP grew by almost 5% in 2011: IMF
posted on 15/03/2012
The UAE economy swelled by 4.9 per cent in 2011 to surpass earlier
expectations due to higher oil output and expansion in the
non-hydrocarbon sector, according to the IMF.
Real GDP growth is projected to moderate to 2.5 per cent this year
but non-hydrocarbon growth will remain strong, said Harald Finger,
who led an IMF mission to the UAE during February 28-March 14 to
conduct discussions for the Article IV consultation with the
country.
The mission met with Minister of State for Financial Affairs Obaid
Humaid Al Tayer, Minister of Economy Sultan Bin Saeed Al Mansoori,
Central Bank Governor Sultan Bin Nasser Al Suwaidi, other senior
government officials, as well as representatives from the business
and financial community.
"The economic recovery looks set to continue. Real GDP growth
reached an estimated 4.9 percent in 2011, supported by increases in
oil production,†Finger said, noting that the Washington-based
International Monetary Fund had earlier project 3.5 per cent growth
for the UAE economy, the second largest in the Arab world.
He said non-hydrocarbon growth also strengthened, to around 2.7 per
cent, backed by strong trade, tourism, and manufacturing.
"Real non-oil GDP growth is projected to further strengthen to 3.5
percent in 2012. With limited potential for further increases in oil
production in the near term, overall GDP growth is expected to
moderate to 2.3 percent," he said.
He expected inflation in the UAE, a major OPEC oil producer, to
remain subdued at around 1.5 percent this year.
"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. Moreover, a renewed worsening of global financing
conditions could make it more difficult to roll over some of the
GREs' maturing debt and affect liquidity conditions in the banking
system" in this environment, the authorities' plans to gradually
consolidate fiscal policy are appropriate."
According to Finger, the large increases in public expenditure that
took place in response to the 2009 crisis should now be unwound as
they expose the UAE to the risk of falling oil prices.
He said the planned gradual pace of fiscal tightening will
strengthen public finances without undermining the economic
recovery.
The recovery will also continue to be supported by an accommodative
monetary stance under the peg to the US dollar.
"Substantial progress has been made in the debt restructuring of
government-related entities (GRE), but several troubled GREs are
still in the process of restructuring," he said.
"Moreover, the GREs are still faced with high refinancing needs and
continued reliance on foreign funding. While they are increasingly
managing their upcoming rollovers proactively, the current uncertain
global financial environment still constitutes a key risk."
He said improved transparency and communication would support the
market refinancing of GRE debt.
"Looking ahead, authorities should continue to improve regulation,
oversight and governance to manage the remaining GRE risks."
Turning to banks, he said the sector remains resilient to shocks,
thanks to substantial liquidity and capital buffers.
Although the banking system has remained comfortably liquid, a
foreign funding shock could generate some foreign currency liquidity
tightening in the banking sector, he noted.
"Despite a considerable rise in non-performing loans since 2008, the
banking system remains well-capitalised. However, care should be
taken to avoid a further increase in banks' loan concentration to
the government and GREs," the IMF official said.
"The authorities have made good progress in establishing databases
and improving the quality of economic statistics. Nevertheless, more
progress is needed to strengthen key statistics, including balance
of payments, national accounts, and fiscal accounts
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