Tourism, oil revenues boost UAE's 2011 growth

UAE Economy Minister Sultan bin Saeed Al-Mansouri said yesterday that the country's economy grew by 4.2 percent in 2011. He said that improved oil prices and revenue from tourism contributed to the rise in GDP in 2011. The UAE's economy has achieved a real growth up to 4.2 percent in 2011 compared to 1.3 percent in 2010. The gross capital formation has recorded a growth of 14.8 percent at the end of 2011 compared to 2010. The UAE's economy has increased in terms of its relationship to the external economy, as exports growth reached 30.7 percent for the same period of comparison Addressing a press conference, he also said the GDP is now expected to grow by three per cent in 2012, down from a rise of 4.2 per cent for 2011. He forecast inflation in the UAE to be between 1-1.5 per cent for 2012 as a whole, up from 0.9 per cent in both 2011 and 2010. The rates of inflation of consumer prices for the year 2011 reached 0.88 compared to the end of 2010. The average index of consumer prices for 2011 was 116.01 compared to 115.00 in 2010. The UAE has meanwhile scooped the first place globally in the field of efficiency of governmental fiscal policy. It has also achieved the seventh place in the efficiency of financial management in the public sector within the Global Competitiveness Report 2012 issued by the International Institute of Management Development in Switzerland. According to the report's findings, UAE has excelled among many other countries including the United Kingdom, Japan, France, and China, due to a number of reasons, most notably among them are government's efforts not to impose taxes on individuals or companies, efficient social security policy and pensions for retired citizens, as well as on the efficiency of the governmental budget in terms of good management of surpluses and spending. The report showed that the most evident among the initiatives in the area of the application of efficient governmental fiscal policy was the zero-based budgeting adopted by the UAE for the years 2011-2013, as it contributed to enhancing the efficiency of government spending and the preservation of public money. In 2011, the UAE also ranked fifth among the world countries in the 'Level of Financial Stability' in the index of the World Economic Forum for Financial Development. A Reuters report said the UAE's leveraged banking system seems to be more resilient to withstand any potential deterioration in economic growth. According to Reuters, Minister Al-Mansouri said he remained optimistic about growth this year: "The economy is in good shape, even excellent shape." He added: "I am optimistic about 2012 with oil prices averaging about $112 (per barrel) in the first four months and that's a positive indication." He expected oil prices to float between $80-100 per barrel this year. Reuters said his forecast for 2012 was lower than his last prediction, made in March, of "almost 4 percent" growth. At that time, Brent crude oil was around $125 a barrel. Since then, signs of a global economic slowdown have dragged oil as low as $96 this week, the cheapest price since January 2011. "Indications so far showed that the real non-oil sector still shows a strong performance. We believe that although growth is unlikely to be as strong as last year it should nevertheless remain solid in 2012," Monica Malik, chief economist at EFG Hermes in Dubai, was quoted as saying by Reuters. Oil accounts for 38 percent of the UAE's $339 billion economy. The UAE's GDP growth accelerated to 4.2 percent in inflation-adjusted terms last year, which was the fastest expansion since 2006, from a downwardly revised 1.3 percent growth in 2010, the National Bureau of Statistics' data showed. Yesterday, Brent crude extended losses to hit a 16-month low as weak US and Chinese economic data fanned renewed fears of a global economic slowdown, which would hit oil demand. Slowdown in China and India, the UAE's major trade partners, coupled with prolonged recession in Europe and weakness in the US, would have adverse effects on the UAE economy. Moreover, refinancing debts of its state-owned entities worth some $98 billion in 2012-2015 remains challenging, the International Monetary Fund has said. "The channels through which these threats can impact the UAE is obviously the oil price as happened in 2008 and financial services sector," said Fabio Scacciavillani, chief economist at Oman Investment Fund in Muscat, told Reuters. "I would say that at present financial institutions in the GCC (Gulf Cooperation Council) and the UAE are in a better shape to withstand the shock, but we do not know the extent of the shock," he was quoted as saying in the report. The global crisis in 2008 burst Dubai's property bubble, triggering a $25 billion debt restructuring in its Dubai World conglomerate in 2009-2010, while other state firms were also hit. Bank lending has remained sluggish since then. In 2009, the UAE economy, the second largest in the Arab world, shrank by 4.8 percent, according to the revised GDP data released on Monday. This was much worse than the 1.6 percent contraction previously estimated by the statistics office. From Arabs News