The UAE economy will slip by around one per cent in 2009 but is projected to recover by nearly 2.9 per cent in 2010 because of higher oil prices and the country's crude output, a key Saudi bank said.
A sharp fall in oil prices will ally with steep output cuts this year to depress the UAE's hydrocarbon sector by nearly 11.9 per cent but this will be partly offset by growth in the non-oil sector, the Saudi America Bank (Samba) said.
The sharp contraction in the oil sector will depress the UAE's real gross domestic production by just one per cent in 2009 after recording one of its highest real growth rates of about 7.4 per cent in 2008, Samba said in a study.
The bank projected average oil prices at around $57 in 2009 compared with a record high of nearly $100 a barrel while it expected the UAE's crude output to plunge by nearly 400,000 bpd to 2.2million bpd through the year.
Since the hydrocarbon sector is still the dominant component of the UAE's economy, the GDP will shrink by around one per cent in 2009 before recovering by 2.9 per cent in 2010 on higher oil prices and output, it said.
A breakdown showed the hydrocarbon sector could swell by around 2.1 per cent and the non-oil sector by nearly 3.1 per cent in 2009.
Apparently forecasting a recovery in global demand, Samba expected the UAE's oil production to recover by around 200,000 bpd to nearly 2.4 million bpd in 2010 but it will remain far higher than its output of 2.6 million bpd in 2008.
The report said lower oil prices and output this year would slash the UAE's crude and gas export earnings from a peak of nearly $123.8 billion (Dh454bn) in 2008 to around $60.1bn in 2009 before recovering to about $69.8bn in 2010.
It expected the plunge this year to slash the UAE's current account surplus from a record 22.6 per cent to only per cent of the GDP. The budget balance could also dive to zero per cent from 30.4 per cent in 2008.
Samba said the improvement in oil prices in the past two months have allied with what it described as "robust" government measures to provide some relief to the country's economy in the first half of this year against the global fiscal crisis.
"A recovery in oil prices, rally in global equity markets, and a limited improvement in external financing conditions, have all provided some relief to the UAE economy during the first half of 2009," it said.Global Arab Network
This article is an extract from report (Rebound of 2.9% by 2010 says Saudi bank) by Business24-7