UAE Economy Set to Record 2.5 Per Cent Growth in 2010

DUBAI - The UAE economy will record 2.5 per cent growth this year after a challenging 2009 and Dubai will lead as a business hub in the Gulf region, one of the leading investment banks in the MENA region said.

By Abdul Basit

Published: Wed 20 Jan 2010, 11:45 PM

Last updated: Mon 6 Apr 2015, 10:25 AM

The economy is forecast to benefit from a pickup in global demand — oil and non-oil — resulting in net exports being the main driver of growth, according to EFG-Hermes new study on Tuesday. A day before, another investment bank Shuaa Capital said that the UAE economy would rebound this year with a 2.5 per cent growth, mostly driven by Abu Dhabi.

Monica Malik, Dubai-based economist at EFG-Heremes, said, “We forecast that the UAE’s recovery will be weaker than in the other GCC countries, with a more muted recovery in domestic demand,”

“Our weaker growth outlook is based on the fact that we now expect a slower recovery in sentiment and confidence, weaker credit growth and ability to raise financing, substantially faster deleveraging of Dubai’s Government-Related Entities (GREs), and a deceleration in spending growth (but still expansionary) by the Dubai government.”

The report suggests that a quick resolution of the debt restructuring, along with increased transparency of the process and a continued improvement in the policy framework will help in the recovery in sentiment.

“Domestic demand will be driven predominately by Abu Dhabi’s investment programme, which we believe will remain on track,” Malik said, who is also one of the authors of the report.

An amended companies law, the creation of new bankruptcy laws, and the potential for improved visa laws could help encourage businesses to relocate to the UAE and encourage new business start-ups.

The study believes that despite the scale of issues facing Dubai at present, it remains the centre of business activity in the Gulf and is likely to retain its lead going forward.

The consolidation of the Dubai exchanges could be positive for capital raising, as it could offer a liquid market for companies seeking to list via a book building process, it added.

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