Euro zone debt crisis, weak US economy may slow growth to 3%, say officials
Europe's worsening debt crisis and weakness in the US
economy may slow growth in the United Arab Emirates to around 3 percent next
year, top officials said on Tuesday.
The OPEC member's economy contracted 1.6 percent contraction
on the back of global financial turmoil in 2009, its worst since 1988, as oil
prices plunged and a local property bubble burst, straining banks in the
world's No. 4 crude exporter.
"It is a source of concern for everybody in the world
so it is a source of concern to us as well because Europe is a very important
trade and business partner for the UAE and worsening conditions economic and
financial will reflect on everybody," Central Bank Governor Sultan Nasser
al-Suweidi told reporters on the sidelines of a statistical conference.
The Gulf country's growth recovered to 1.4 percent in 2010
as oil prices rose but the hydrocarbon-reliant economy continued to grapple
with the fallout of a $25bn debt restructuring in Dubai's flagship company.
"If we continue this up and down situation in the US
and Europe, our (GDP growth) figures should hover around three percent. That
will rely on what will happen with the oil price and what will happen in the
political scene in the region and the Middle East," Economy Minister
Sultan bin Saeed al-Mansouri said at the same event.
"If, and that is a very important if, the situation in
Europe and in the US is corrected in a way that addresses the crisis in a very
good way, my expectation is that the UAE economic growth could reach about four
percent," he said.
However, the UAE, the second largest Arab economy, does not
need to introduce any new liquidity or provisioning measures for its banks, the
central bank's Suweidi said.
"There is no need for that," he said when asked
whether new liquidity measures were necessary.
"Why do you take action when there is absolutely no
need? These are fluctuations and we are capable dealing with fluctuations from
our own sources, which are customer deposits, corporate deposits and huge
capital and reserves of UAE banks," Suweidi said.
Exposure of UAE banks to sovereign and private sector debt
in Europe is small and their capital adequacy ratio was around 11 percent, he
said in October.
Asked whether the UAE considered following Austria's central
bank, which made a deal with China to invest into some Chinese currency assets,
Suweidi said: "Well, it depends what is the most suitable for the central
bank of the UAE."
"If it is strategically, I cannot comment in advance
about it, so we will leave it for when the time comes," he said.
Inflation in the UAE is expected to stay between 1.8 and 2.0
percent next year, around the same level expected for 2011, Mansouri also told
reporters, adding the ministry would keep price controls on basic commodities
launched earlier this year.