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UAE - Economic Situation and the Effect of the Current Economic Crisis:
There is no escaping the fact that the UAE has endured a difficult start to 2009. Though, whilst the financial crisis and the global economic slowdown will obviously affect the United Arab Emirates, with some capital withdrawal already apparent and mounting concern about bank exposure to real estate assets, any fallout should be modest in the short-run. The economy remains well shielded from a sharp downturn by its large current account surplus, estimated at over $285bn (27.9% of GDP) in 2008 from $136bn (18.6% of GDP) in 2007, on top of the government's large controlled overseas assets.
In terms of growth prospects, real GDP growth is now seen at about 7.2% in 2008 (median average of the main international agencies) and, amid mounting uncertainties about the global economic outlook and investment flows, the median average 2009 real GDP forecast is set to fall to 2.0%.
One key prospect to emerge from the slowdown will be the reduced inflationary pressures resulting from the fall in soft and hard commodity prices. Rapidly rising food prices, rents and crude oil prices lifted inflation in the United Arab Emirates to 11.1% on average in 2008, but with the sharp fall in commodity prices witnessed since last summer, international agencies expect a moderation to around 8.9% in 2009.
The United Arab Emirates, and indeed the GCC as a whole are in a strong position to withstand the global economic turmoil even though all components of GDP are expected to weaken in 2009. As mentioned, international agencies suggest that real GDP growth will moderate to 2.0% in 2009 from an expected 7.4% in 2008.
[official source]
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