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UAE not Heading Towards Recession
ABU DHABI - The Governor of the UAE Central Bank, Sultan bin Nasser Al Suwaidi, said on Wednesday that the country is not going into recession this year.
“There could be a low single-digit economic growth in the year 2009”, he said, while speaking to reporters after meeting with a French delegation headed by Christian Noyer, Governor of Central Bank of France, here in the capital.
The Governor’s comments come at a time when private sector economists are forecasting a low growth in the range of 0.0-2.0 per cent this year, declining from estimated 6.0 per cent in 2008. In the last quarter of 2008, the UAE started experiencing significant economic headwinds as a result of global economic crisis. The country’s two main stock exchanges in Dubai and Abu Dhabi fell 72.5 per cent and 47.5 per cent respectively in 2008 and have continued to slide downwards since the beginning of 2009. The recent fall in oil prices to $35 a barrel is also expected to significantly affect the oil revenues. The UAE’s oil revenue is projected to be about $84 billion in 2009 from $106.5 billion in 2008.
Asked whether economic recovery can take place in the second half of the year, as some analysts are forecasting, Al Suwaidi said, “I cannot expect anything at this point in time... I am not a magician... as it will also depend on the circumstances because things on economic front are evolving.” He also added that the Ministry of Economy was the competent body to give outlook on economic growth.
Asked if he favours a stimulus plan for the fast economic recovery, as has been introduced by many countries, the governor commented, “Stimulus plans are always good for the growth in economy, but it depends on the government, how it sees its vitality.”
The UAE Central Bank cut its key policy rate by 0.5 per cent to 1 per cent on Monday to boost liquidity. Governor Sultan bin Nasser Al Suwaidi declined to comment on whether the rate cut was enough to augment lending.
When a reporter drew his attention towards the lacklustre response by banks in processing applications for loans, the governor said that under these circumstances it was a natural response. But he said that the situation will gradually improve in the coming months as liquidity in the banking system is showing signs of improvements.
Al Suwaidi said that the Banking Supervision and Examination Department of the Central Bank is closely scrutinising the loan books of all the banks. The questions about banks’ performance, non-performing assets (NPAs) and other matters can be answered only when the department completes its study, he said.
The Governor said that the GCC countries will go ahead with their infrastructure expansion plans and this will also help stimulate economic growth.
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