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Sat 14 May 2011 12:10 PM

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UAE economy set to grow 3.3% in 2011, says BMI

Business Monitor International raises its forecast as it sees UAE benefiting from Bahrain unrest

UAE economy set to grow 3.3% in 2011, says BMI
Abu Dhabi will drive the UAE economys growth in 2011, according to Business Monitor International. (Getty Images)

The UAE economy is on course to see 3.3 percent growth this year with Abu Dhabi outperforming Dubai, Business Monitor International has said in a new forecast.

It said the UAE capital's large-scale infrastructure investment plans would drive the growth while "ongoing concerns" surround Dubai's debt repayment schedule.

"With credit conditions still relatively weak, a pronounced recoveryin non-hydrocarbon sector growth appears unlikely at this stage," analysts said in a new report.

BMI said it saw the UAE's real gross domestic product expanding by 3.3 percent in 2011, up 0.3 percent from its previous forecast.

This comes on the back of ongoing political turmoil in Bahrain, which should serve to benefit Dubai given that the emirate was a key competitor of Manama’s in the financial services and tourism industries," the report said.

It added that the country would average 3.7 percent growth through to 2015.

"Abu Dhabi will outperform Dubai over the coming years given theformer’s large-scale investment plans targeting the infrastructure sector as well as ongoing concerns surrounding the latter’s lingering debt repayment schedule," BMI said.

With real estate prices looking likely to fall further, BMI revised down its end-2011 consumer price inflation forecast to three percent from a previous forecast of four percent.

"Any outbreaks of public unrest would have significant repercussions for the UAE ’s reputation as an inherently stable environment for foreign investment," BMI analysts said.

They added: "Further debt restructurings by major government-related entities in 2011 would do little to inspire confidence that the UAE’s financial troubles are now firmly in the past."

Separately, the National Bureau of
Statistics reported on Saturday that the economy of the UAE grew 1.4 percent in real terms in 2010 after shrinking
1.6 percent in the previous year.

The bureau this month recalculated gross domestic product
data for previous years and changed its base year for gross
domestic product (GDP) in constant prices to 2007, from the
previous benchmark of 2000.

Last week, the UAE's central bank governor said the country's economy was expected to grow by up to five percent this year and the oil producer saw no significant change in capital flows due to regional unrest.

"The UAE is linked to many, many other economies, other than just certain economies. Therefore, the growth rate will stay at forecasted between 4 and 5 percent this year," he said.

The UAE's economy shrank 1.6 percent in 2009, the first contraction since 1988, compared with a previous government estimate of 1.3 percent growth, revised data showed on Wednesday.

The 2008 global credit crunch shelved projects worth billions of dollars in Dubai, the UAE's trade hub known for its artificial palm-shaped islands and the world's tallest tower, while oil output also fell as crude prices plunged.

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