The pace of UAE’s economic growth will pick up from last year’s modest levels but remain subdued along with consumer prices, Central Bank Governor Al Suwaidi said.
“The situation globally seems to have stabilised, which reflects on the UAE’s economy,” Central Bank Governor Sultan bin Nasser Al Suwaidi said, adding: “There will not be growth at high levels but there will be growth,” he told reporters on the sidelines of the inauguration ceremony of the headquarters of Sharjah Islamic Bank.
The World Bank in an October report had predicted that UAE’s gross economic product, or GDP, will expand 3.3 per cent in 2010, after growing an estimated 0.3 per cent in 2009 and 7.4 per cent in 2008. Economy Minister Sultan Al Mansouri said on December 13 that GDP likely grew 1.3 per cent and inflation slowed to 2 per cent in 2009 from 12.3 in 2008.
“I think we don’t have to talk about inflation. Inflation will be very low for even more than one year,” said Al Suwaidi.
Simon Williams, a Dubai-based economist at HSBC Holdings expects inflation of 4 per cent in 2010.
Al Suwaidi said that the country will continue to keep its currency pegged to the US dollar. “We are pegged to the dollar, so we will be pegged to the interest rate too,” he said, indicating that the second-largest Gulf economy won’t raise interest rates before the US does.
The UAE will stay out of a plan to establish a single currency for the Arab nations of the Gulf, he said. The country pulled out of the project in May last year because its request to host the common central bank was rejected in favour of the Saudi Arabian capital, Riyadh.
Oman isn’t taking part in the project either. Four countries are participating in the single currency plan — Saudi Arabia, Kuwait, Qatar and Bahrain.
Al Suwaidi also expects banks to book more provisions against bad debts in the coming months. “Provisions go up and down depending on the crisis. We are still in a crisis all around the world, although this has come down significantly, but the crisis still requires more provisions,” he said.
He said that banks in the UAE do not face any liquidity problems, but enjoy high liquidity and are not in need of any additional support. He also noted that property prices in the UAE have declined to the point of becoming attractive for investment.