Long-term global slowdown forecast
The global economic slowdown is set to continue in the long term, according to a report by the Organisation for Economic Cooperation and Development (OECD). And the UAE will not be insulated from its effects as oil prices drop and international trade becomes sluggish, analysts say.
“The UAE is a small and open economy. As a consequence it is directly impacted by global economic and market trends. The global economic outlook is still poor and that’s going to weigh on the rates of growth seen here in the UAE,” Simon Williams, chief economist Middle East and North Africa at HSBC, told Gulf News.
“There’s a danger that people overestimate how protected the UAE is from global economic trends.” A weak global economy will impact the UAE as demand for the country’s goods and services will weaken and it will be more difficult to access international financing and foreign direct investment, he added.
The faltering US and European economies and a slowdown in emerging markets, most notably China, will have an impact on the UAE economy in terms of oil prices, according to Dr Nasser Saeedi, Chief economist at the DIFC. “We expect lower oil prices in 2012... in the range of $90 (Dh330.3) to $100 lower than the average achieved this year. This means a lower current account and trading account surplus and lower inflows into the UAE,” he said. “Lower oil prices and lower volumes of international trade will impact growth rates in the UAE,” he predicted, anticipating 3 per cent to 3.5 per cent growth in 2012. But he added that slowing economic growth in China was accompanied by lower inflation, meaning goods and services from the country, a major trading partner, would be cheaper.
Williams added the UAE economy is more resilient now than during the global recession of 2008 and is not expected to return to the crisis levels.
The OECD, the Paris-based think-tank, released a report yesterday showing the composite leading indicators (CLIs) for September 2011 that are designed to anticipate the turning points in economic activity.
The indicators “continue pointing to a slowdown in economic activity in most OECD countries and major non-member economies”, it said. Compared to last month’s assessment, the CLIs point more strongly to slowdowns in all major economies.
In Japan, Russia and the US the CLIs point to slowdowns in growth towards long-term trends. In Canada, France, Germany, Italy, the United Kingdom, Brazil, China, India and the euro area, the CLIs point to economic activity falling below long-term trend.