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Sun 10 Jan 2010 07:11 AM

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UAE economy seen growing 3.6% in 2010 - study

Business Monitor International forecasts 'fairly quick rebound' after downturn.

UAE's economy is seen growing by 3.6 percent this year after contracting by nearly three percent in 2009, according to a new report.

Business Monitor International's latest business forecast report for the country said it was expecting a "fairly quick rebound" for the economy, after being hit hard by the impact of the global financial crisis last year.

"Our 2010 real GDP (gross domestic product) growth projection currently standing at 3.6 percent. Growth will be driven by a combination of rising oil revenues, which will feed through into increased bank liquidity, a slow recovery in household consumption, and a rise in private sector investment," BMI said.

But the research firm added that it did not see the UAE "returning to the high growth rates of recent years".

BMI's 2010 growth prediction is more optimistic that the UAE's own Minister of Economy Sultan Bin Saeed Al Mansouri who last month said he expected the economy to grow by 3.2 percent in 2010. However he also said he saw 1.3 percent growth in 2009, compared to BMI's view that it shrunk by 2.8 percent.

BMI's report added: "Consumers have become altogether more cautious in their spending patterns, as have banks in their lending practices, which will result in a more sedate growth trajectory going forward."

Analysts said government policy would come to the forefront as the UAE emerged from its economic slowdown, adding that increased public sector spending was likely to have "prevented the recession from becoming even deeper".

BMI added: "It is more as an enabler of future growth that the government will have most influence. While there appears to be high-level recognition of the need to improve the UAE’s infrastructure and competitiveness, bureaucracy and a lack of planning can still hamper the business environment, while the continued failure to provide timely economic data remains a problem."

The report said that although the country was politically stable, issues such as the recent power shortages in Sharjah "are illustrative of a number of shortcomings, namely the absence of a unified economic development and planning strategy".

The UAE’s business environment is improving – it was ranked 33rd globally in the World Bank’s recent doing Business 2010 report, up from 47th place in 2009.

"We believe that the economic downturn will have given the authorities pause for thought about its investment climate; indeed, senior ministers have called for an increased focus on competitiveness, as the UAE seeks to rebuild its international reputation following the property market crash," BMI added.

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