The National Bank of Kuwait said on Sunday it has revised up its forecast for growth in the UAE's non-oil GDP in 2011.
In a new report, it said it expected to see four percent growth, compared to the three percent it previously forecast.
"The improvement comes from a combination of higher than expected oil prices, a strong performance from the trade sector, and expectations that faster regional growth will benefit Dubai," NBK's report said.
"In addition, lower than expected inflation will boost the country's international competitiveness and support real incomes, benefiting consumer-facing sectors."
It said these factors were set against the "continued drag on activity from the debt overhang, corporate restructuring, weakness in the construction and property sectors and sluggish bank lending".
Growth in the hydrocarbon sector output in 2011 has also been revised up, from five percent to seven percent, NBK added.
"So long as oil prices remain high, further - albeit more modest increases in output are seen in 2012. As a result of these changes, overall GDP growth is seen at close to five percent this year and next."
It added that as long as food price inflation continues to decelerate, inflation was likely to "remain very low this year", averaging two percent.
"A lack of published data obscures the true picture of the UAE's fiscal position, but we suspect that the outlook is very comfortable," the report said.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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