Country Report United Arab Emirates May 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 much lower over the forecast period than they were in the preceding three years.
• The Economist Intelligence Unit has made a small downward adjustment to its forecast for the UAE economy. Real GDP is now expected to contract by 1.7% in 2009 (1.6% last month), before recovering in 2010 and growing by 4.4%.
• We have increased our estimate of the UAE's total external debt, now taking into account quasi-sovereign debt held by partly state-owned firms in Dubai. Total external debt at end-2008 is estimated at US$127bn.
• 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.
• 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

• In April, Dubai's ruler and the UAE prime minister, Sheikh Mohammed bin Rashid al-Maktoum, gave his first major address to the media since the economic downturn began in the emirate in October.
• Sheikh Mohammed strongly criticised the recent negative press that Dubai has received, claiming it was a deliberate attempt to harm the UAE and Dubai. He also claimed that anti-Arab bias was behind the coverage.
• Sheikh Mohammed made several references to his vital reliance on support from Abu Dhabi, stating that Dubai is not a city on its own but a member of the UAE which he described as "strong, resilient and successful".
• According to Dubai's ruler, private firms reluctant to hire UAE nationals will soon face pressure to do so, given the Dubai government's increasingly strong advocacy of what it describes as "corporate social responsibility".
• An amended property law in Dubai paves the way for resolving the backlog of disputes arising from stalled construction projects. The law allows partial refunds of deposits to buyers who refuse to pay owing to construction delays.
• The Central Bank of the UAE's assets declined by 32% in 2008 to Dh193.7bn (US$52.7bn), down from Dh285.9bn the previous year, the WAM news agency reported. The last time the Bank's balance sheet contracted was in 2003.
• M&R, a large constructor, faces huge losses owing to cancelled work in Dubai.

Source: Country Report

This report covers the following industry codes:
SIC Code: 65;60;47
NAICS Code: 53;52;48