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UAE Economy May Contract This Year, Minister Says | ASHARQ AL-AWSAT English Archive 2005 -2017
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DUBAI, (Reuters) – The United Arab Emirates economy may contract this year but its performance depends largely on the global economy in the second half of 2009, economy minister Sultan bin Saeed al-Mansouri said on Thursday.

His comments echo a prediction by the central bank governor this week that the once-booming economy of the world’s fifth-largest oil exporter could shrink as it cuts crude output and non-energy sectors face a slowdown.

“There could be some contraction … it depends on what happens in the world economy as a whole in the second half,” Mansouri told reporters. “There is no way of predicting what will happen by the end of the year due to the situation in the world economy … I’d like to be conservative and say that the UAE will be affected by the slowdown in the world economy.”

UAE officials had previously predicted low but positive growth for the economy, despite a collapse in global oil prices and a sharp downturn in the property sector in Dubai, part of the seven-member UAE federation.

Dozens of expansion projects have been cancelled and thousands have lost their jobs in Dubai. Standard and Poor’s said on Tuesday that the former boomtown’s economy could shrink 2-4 percent this year.

A Reuters poll showed this week that residential real estate prices in Dubai could slump almost 38 percent in 2009 as the financial crisis bites.

The UAE central bank and finance ministry have launched 120 billion dirhams’ ($32.67 billion) worth of funding facilities for banks since September in an effort to unlock credit markets.

The central bank, meanwhile, bought $10 billion of Dubai government bonds to enable the emirate to set up an emergency fund for struggling companies.

“Banks at the present time have stabilised,” Mansouri said. “Liquidity from the government is available. It just depends on how we allocate it at the right time to the right entities as we go on.”


The UAE is finalising a plan to lower interest rates to stimulate the economy but the central bank has said it would not cut the price of money to zero.

Mansouri said the banking sector had stabilised and the government was ready to provide any liquidity to companies as needed. “We are ready to address any kind of issues with regards to liquidity that may affect the economy of the UAE as we go on,” he said.

Standard & Poor’s has downgraded the credit ratings of seven Dubai firms and said it was worried about its banks’ health.

But it was not yet clear what would become of troubled Dubai mortgage lenders Amlak and Tamweel, which were brought under the umbrella of the federal government after the global financial crisis hit the Gulf state late last year.

Mansouri said the two Islamic mortgage firms could still be merged, though that would require approval from the companies themselves. “I think it is one of the good options we are looking at,” he said, adding that liquidation was not an option for now.