UAE economy to rebound 2.4%: IMF

The UAE's economy will rebound by 2.4 per cent this year, and expand by 3.2 per cent in 2011, after contracting by 2.5 per cent last year, the International Monetary Fund (IMF) said in its World Economic Outlook released on Tuesday.

These figures are in line with earlier projections by leading institutions such as Standard Chartered and Economist Intelligence Unit (EIU) and NCB Capital.

The new estimate is in sharp contrast to the IMF’s earlier forecast when it revised the GDP growth rate to three per cent from its earlier estimate of 2.7 per cent for 2010.

Consumer prices are expected to rise by 2.5 per cent in 2011 from the current year’s 2 per cent and last year’s 1.2 per cent, thus indicating an inflation spiral.
 
Growth in Saudi Arabia is forecast to bounce to 3.4 per cent in 2010, and 4.5 per cent next year, from a modest 0.6 per cent in 2009.
 
The Regional Economic Outlook by IMF said consumer prices will grow by 2 per cent this year and further by 2.5 per cent in 2011, indicating an inflation rate spiral.

IMF said the Mena region is recovering strongly. A rebound in oil prices has triggered a strong recovery and the GDP growth for the region is expected to reach 4.1 per cent in 2010, compared to 2 per cent in 2009. It projected an economic expansion of 5.1 per cent in 2011.

"The strength of the recent economic recovery in the Mena region is largely underpinned by the rebound in oil prices from their trough in 2009, which has boosted receipts for oil exporters in the region" the report said.

The IMF, however, warned that Mena economies remain vulnerable to any drop in oil prices, and possible heightened economic turbulence in Europe, which is a major trade destination for non-oil exporters.

Oil exporters are expected to see a 3.8-percent growth in 2010 and 5 per cent in 2011.

"The economic outlook in the region is closely linked to global developments, primarily through the impact of global economic activity on oil prices. The impact is not confined to the Mena exporters," the IMF said.

Future increases in oil prices are expected to be "modest," it said.

The possibility of heightened economic turbulence in Europe poses a significant downside risk for oil importers in the Mena region. Europe is their largest trading partner, accounting for about half of their total exports.

The regional economies continue to face a decline in external sources of funds, and a slow deposit growth which is curtailing the ability of banks to lend, the IMF said.

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