The UAE has cut its economic growth forecast for 2012 to three per cent as it faces up to challenges including lower oil prices, sanctions on trading partner Iran and a slowing global economy.
The UAE Ministry of Economy yesterday announced that while the country saw its gross domestic product (GDP) grow by 4.2 per cent in 2011 to Dhs981.7 billion ($267.2 billion), it now expects this year to be more modest.
The Minister of Economy, Sultan bin Saeed Al Mansouri, said he remains “optimistic” about 2012, but a raft of economic woes across the world has made him downgrade a previous prediction of a four per cent hike in GDP for the UAE in 2012.
UAE Minister of Economy has called for global effort with the economy set to grow by three per cent
Top of the list of challenges for the UAE this year, as the world’s fifth largest oil exporter, is the fall in crude prices due to a slowing global economy.
Earlier this year Brent crude was trading at a high of more than $125 a barrel - but has since plunged to below the $100 mark, the cheapest price since January 2011.
Al Mansouri admitted a drop in prices “would definitely affect the economy” - but added “as long as it’s hovering around the $100 mark, then it’s all right from an economic point of view. That’s a right price for it”.
The minister said his expectations were that the oil price was not going to drop below $80 - but would fluctuate between that and $100, and “could go beyond that”.
Asked what impact the various international sanctions imposed on Iran - suspected by Western countries of developing nuclear weapons - are having on the UAE, the minister said: “Trading is definitely being affected. Go and talk to anybody who is a trader and they are complaining about it.”
Growing worries over the eurozone crisis and the predicted slowdown in China - the UAE’s second biggest trading partner after India - are also potential stumbling blocks to growth.
Of Europe, Al Mansouri said it was mostly a wait-and-see situation - but advocated stronger ties between nations that are faring better than others.
“Nations with positive growth should align and try and bring the world out from this situation,” he said, using the UAE’s relationship with Europe’s largest economy Germany as an example.
The Ministry of Economy also announced it expects inflation to remain low this year in the UAE, staying between one and 1.5 per cent.