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UAE not staring at recession right now - central bank

Even as reports and rumours about severe job cuts, wage evasions, visa cancellations and volatile real estate prices in the UAE run amuck, its central bank governor has assured that the Gulf nation is not headed for a recession right now.

However, the state may be staring at low, single-digit growth levels in 2009, Sultan Nasser al-Suweidi admitted on Wednesday.

A recession is defined as two consecutive quarters of negative economic growth.
Suweidi was cautious to commit about a recovery, though. "It depends on circumstances because things are changing and evolving," he said, according to a Reuters report.

The report said that the UAE’s central bank would request banks to set aside funds to cover for potential writedowns if banks unveil non-performing assets.

"We will wait until we see the examination and if there are, then we will ask for provisions," he said.

Suweidi’s comments come at a very crucial time. Just three weeks back, analysts at two leading banks in the Middle East told Arabian Business hinted possibility of a recession in the UAE this year, on fears of global slowdown and weak oil prices resulting in hampered domestic GDP growth.

Standard Chartered Bank has slashed its 2009 economic growth forecasts for Gulf oil producers in view of the global downturn, revising its UAE growth forecast downward by more than 2 percentage points to 0.5 percent.

“It [a recession] is a possibility with the large OPEC-led production cuts and the slowdown in GDP,” said Monica Malik, senior economist at Egyptian investment bank EFG-Hermes.

Oil prices have remained a concern for Gulf countries, more than $100 a barrel from their $147 peaks last year.

With OPEC’s hawkish stance and stringent measures like cutting of output for support, countries like UAE are striving hard to keep ‘recession’ at bay, a word less heard of, in the Middle East.

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