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UAE Brighter Macro-Economic Prospects in 2010

Mehmood-Ul-Hassan Khan

The first decade of the 21st century comes to an end last week. The decade was full of achievements and challenges. It was the decade of socio-economic transformation, liberalization, structural reforms, high standards of good governance and the last not the least people participation. It was also the period of strong economy, stable political system and above all leader’s Immaculate Conception. An excellent crisis leadership and proactive monetary and fiscal measures helped the UAE economy to withstand the fallout of the financial tsunami more efficiently than most other economies.

UAE assurance to International Credit Agency Moody

The UAE assured Moody’s that its financial assets are worth at least double the value of the emirate’s gross domestic product, well above the external debt of the UAE. It is good thing that even ADIA’s (Abu Dhabi Investment Authority) foreign assets alone are considerably greater than the external liabilities of the country. Abu Dhabi’s GDP reached Dh519.9 billion ($141.5 billion) in 2009.

Consumer Confidence

Consumer confidence plays very important role in the socio-economic revival, survival and sustainability. The second quarter of 2009 saw 30-35 per cent growth in consumer spending on the electronics and textiles are signs of consumer confidence. Even the steady growth in the automobile sector shows consumer confidence in UAE. According to the investment bank, Credit Suisse the strong government response, improving oil market conditions, strong regulatory mechanism, structural reforms and the general global economic recovery, would help the UAE economy record substantial growth in 2010. It is predicted that Dubai and the overall UAE economy to be on a more solid footing by 2011 with GDP growth accelerating to about five per cent.

Governor’s Statement/Prediction

According to the UAE Central Bank Governor Sultan bin Nasser Al Suwaidi the pace of UAE’s economic growth will pick up during 2010. The recovery in global economy would produce contributory effects to the UAE economy. Furthermore, the UAE economy would be stable, strong and sustainable during 2010. The Governor said that the country will continue to keep its currency pegged to the US dollar. It is predicted that the interest rate would not be raised which would facilitate the business community and industrialists to make their future plans for productions and investments in different sectors of the economy.

Rational Banking Regulations

Banks play very important role in the socio-economic development of any country and UAE is not any exemption. Despite the ongoing global economic recession and banking crunch the UAE banking sector is well capitalized. Al Suwaidi advises banks to book more provisions against bad debts in the coming months. He also expects corporate governance in the banking industry to make it stronger, stable and productive. According to many regional and international financial institutions UAE does not face any liquidity problems, but enjoy high liquidity and are not in need of any additional support. He also noted that property prices in the UAE have declined to the point of becoming attractive for investment. The pre-emptive additional liquidity facility announced by the Central Bank of the UAE has resulted in the 3-month EIBOR rate remaining at very low and manageable levels of 1.9 per cent. The month-on-month growth of M2 stood at 1.9 per cent in October 2009.

Corporate Earnings

Corporate earnings would be up to 5-7 per cent in 2010 and corporate de-leveraging-higher retained earnings/bonus shares/rights issues-to begin to converge corporate gearing in line with global peers.

World Bank Report (October 2008)

According to the latest report of the World Bank UAE’s gross economic product, or GDP, would expand 3.3 per cent in 2010, after growing an estimated 0.3 per cent in 2009. It conveyed healthy signs to the business community and potential investors in the country and around the globe. Moreover, inflation would be low in the range of 3-4 percent in 2010.

Rise to UAE Foreign Trade Volumes

Export-oriented economic models and countries always have better chances of socio-economic development and UAE is not any exemption. According to the Federal Customs Authority (FCA) the country managed to increase its non-oil exports. Imports reregistered 22 percent increase in 2009. Many hydrocarbon projects are in final stage afterwards, the non-oil exports would be increased.

According to the latest report of the HSBC Trade Confidence Index the UAE traders are the most confident on trade activity growth in the 2010. The UAE has been following the functional and proactive trade policy that focuses on diversity. UAE has been promoting non-oil exports to enhance its competitiveness and integrate more into the regional and global market. With concerted efforts UAE has succeeded which has been commended and certified by several prominent organizations such as the World Trade Organization. Moreover, the UAE exported non-oil merchandise amounting to 12.6 million metric tones.

According to the Ministry of Foreign Trade UAE, it exports concentrated 65.4 and 65.3% for the years 2006 and 2007, respectively, on around 10 countries at a growth rate of 24% in terms of export volume. The export contribution of the rest of the world was at 34.6 and 34.7% for the same years, respectively, at a growth rate of 24.2%. The group of Asian countries including Pakistan represented one of the largest suppliers of UAE foreign trade between 2006 and 2007. It contributed around 42% during the period. Moreover, the growth rate in the volume of foreign trade with these countries was close to 73%. Moreover, the foreign trade prospects are brighter even in 2010.
Concluding Remarks

Consumer confidence is high in UAE. Foreign investment prospects are bright. Corporate earnings are strong and going upwards. International credit agency Moody showed great confidence in the credit rating and other main indicators of macro-economy of the UAE in 2010. It is predicted that macro-economy of the UAE would be strong, stable and sustainable in 2010.

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