Country Report United Arab Emirates June 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 federal public finances are forecast to register deficits in 2009 and 2010 because international oil prices are expected to be considerably lower over the forecast period than they were in the preceding three years.
• Real GDP is now expected to contract by 1.8% in 2009, largely because of cuts in oil production, before recovering in 2010 and growing by 4.2%.
• The UAE's total external debt, taking into account quasi-sovereign debt held by partly state-owned firms in Dubai, is estimated at US$127bn (52% of GDP) at end-2008, although net-debt (less foreign reserves) was only 38% of GDP.
• The strengthening of the US dollar since mid-2008 has bolstered the fixed-peg exchange-rate regime, and will also help to ease imported inflation. Inflation is forecast to average 5.3% in 2009-10, compared to an estimated 20% in 2008.
• The current account will return a much smaller surplus in 2009, as export earnings on both goods and services falls, before partly recovering in 2010.

Monthly review

• Dubai's finance director, Nasser al-Sheikh, who was highly regarded for his transparent approach to addressing Dubai's debt-management problems, has been demoted, apparently reflecting political tensions.
• In a minor federal cabinet reshuffle, two deputy prime ministers appointed by Abu Dhabi have been replaced, and the health and education ministers have exchanged portfolios.
• After years of US lobbying for a suitable plot of land, work has begun on a new US$126m US consulate on Dubai Creek.
• In a dramatic move, the UAE has withdrawn from the plan to establish a common Gulf Co-operation Council currency in frustration at the decision to locate the regional monetary council in Saudi Arabia rather than Abu Dhabi.
• A struggling developer, Nakheel, has been allocated part of the Dubai government's US$10bn bail-out fund to begin settling its arrears to contractors.
• Data from two UK-based real estate consultancies put Dubai near the top of the world table in falling house prices. Knight Frank put the fall at 32% in the year to March 31st, whereas Colliers recorded a 41% fall in the first quarter.
• Bids are due by June 27th for the development of the Shah sour gasfield in Abu Dhabi. The US$12bn project, one of the largest new energy projects in the region this year, aims to produce 1bn cu ft/day of gas.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;60;70;49;20;47;37;65
NAICS Code: 212;52;72;22;11;311;48;336;53