Country Report United Arab Emirates January 2009

Outlook for 2009-10

• 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 Economist Intelligence Unit forecasts that the federal public finances will fall into deficit in both 2009 and 2010 on the back of expectations of low international oil prices in both years compared with the last five years.
• We have made a further small reduction in our forecast for economic growth as the world economy enters recession. We expect real GDP growth to fall to just 1.3% in 2009, before recovering slightly, to 4.5% 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 US interest rates are inappropriate for the UAE, discouraging savings.
• Expected oil production cuts and low forecast oil prices mean that export earnings are likely to decline by 26% in 2009, from around US$200bn in 2008.
• Falling export earnings on both goods and services will lead the current account to dip into deficit in 2009 before recovering in 2010.

Monthly review

• As the global crisis worsened in the final month of 2008, financial gloom and rumours of mass redundancies and sell-offs swept the UAE, especially Dubai, which, of the seven emirates, has so far been the worst affected by the crisis.
• Abu Dhabi proceeded with a small reshuffle of its ruling council in January.
• The UAE has signed a weapons agreement with the US worth US$3.3bn.
• Dubai followed the federal government in announcing a fiscal stimulus package aimed at boosting economic growth, increasing public spending by 42% in 2009, to Dh37.7bn (US$10bn).
• Dubai's Real Estate Regulatory Authority (RERA) has finalised a new rental index to help benchmark rents in the emirate. The RERA has also begun work on ranking the more than 100 property developers operating in Dubai.
• The two main contractors in Dubai's Meydan horse racetrack were fired in January for breach of contract.
• Falling construction activity in Dubai has led to large-scale lay-offs, implying that real GDP growth could contract in 2009.
• Several ratings agencies have recently made significant downward revisions of their outlook for the UAE banking sector, based on UAE banks' exposure to the falling value of local equity and real estate markets.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;10;70;15
NAICS Code: 52;212;72;23

This report covers the following industry codes:
SIC Code: 60;10;70;15
NAICS Code: 52;212;72;23