Country Report United Arab Emirates March 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 made a further sharp downgrade to its forecast for UAE economic growth. Real GDP is expected to contract outright, by 1.4%, in 2009, before recovering in 2010 and growing by 4.2%.
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 around 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.

Dubai's crackdown on corruption continued in February and March with several arrests of people suspected of fraud and embezzlement.
It was made official that a new French military base in Abu Dhabi will open in May, with up to 500 French troops. This forms part of the UAE's attempt to reduce its military dependence on the US.
The UAE Central Bank's purchase on February 22nd of US$10bn of an unsecured US$20bn bond issued by Dubai signalled the federal government's willingness to provide financial assistance to Dubai, allaying market fears.
Abu Dhabi's top economic policy board called in February for counter-cyclical measures to support banks and major projects as part of an overall economic stimulus plan.
A new law was announced in February that makes it more difficult to make redundant UAE citizens employed in the private sector.
Moody's Investors Service, a credit ratings agency, announced in February that it had placed all six government-related corporate debt issuers in Dubai on review for a possible downgrade.
Dubai's economy grew by 7% in 2008, but is poised to contract in 2009.
Some 53% of UAE-wide construction projects have stalled in recent months.

Source: Country Report

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