Country Report United Arab Emirates February 2009

Summary

The outlook for the domestic political scene is stable, and the president, Sheikh Khalifa bin Zayed al-Nahyan, will maintain the UAE's relatively liberal social and economic policies, as well as its pro-Western foreign policy stance.
The federal public finances are forecast to register deficits in 2009 and 2010 because international oil prices are expected to be much lower over the outlook period than they were in the preceding three years.
The Economist Intelligence Unit has revised down further its forecast for UAE economic growth as the world economy enters recession. We expect real GDP growth to fall to just 0.9% in 2009, before recovering slightly, to 4.3%, in 2010.
The strengthening of the US dollar since mid-2008 has bolstered the fixed-peg exchange-rate regime, and will help to ease imported inflation, although the low interest rates that the peg requires are inappropriate for the UAE.
Export earnings are forecast to decline by close to 35% in 2009, as oil production is cut and oil prices remain low.
The current account will move into deficit in 2009, as export earnings on both goods and services falls, before returning to surplus in 2010.

According to Amnesty International, several people in the UAE have been charged with terrorism offences (the maximum penalty for which is death) and face trial at the Supreme Court, whose verdicts cannot be appealed.
Parliament has approved a new media law, which allows the authorities to impose heavy fines on journalists who are deemed to have harmed the UAE's "reputation" or "economy".
The UAE's state-owned telecoms firm, Etisalat, has announced plans to invest up to US$5bn to launch mobile-phone services in Iran in the next five years.
A new decree has frozen rents on Dubai tenancy contracts signed or renewed in 2008, but has abolished the 5% cap on annual increases in rents.
The Central Bank cut its benchmark overnight repo rate by 50 basis points to 1%, effective from January 19th.The move was intended to boost liquidity in response to receding inflationary pressures and the global downturn.
Dubai's non-oil trade rose to Dh934.7bn (US$254.5bn) in 2008, compared with Dh678.5bn (US$184.7bn) in 2007, according to Dubai World, the holding company of DP World, the state-run ports operator.
The Dubai housing market declined in the last quarter of 2008. On average, prices rose by 61% in the first three quarters of the year and then dropped by 23% (from their September peak) in the final quarter.