Economic growth in the UAE will more than double this year to 3.2 per cent as oil prices strengthen and business activity picks up, the Minister of Economy says. Sultan al Mansouri's GDP growth prediction was above a forecast from the IMF. "I'm very satisfied, happy and optimistic about 2010," Mr al Mansouri said at a tea industry event in Dubai. "The difficult side of it is behind us. Now we are moving on. If you look at the price of oil, it's going up. That's a positive sign that GDP should grow."
Persistently high oil prices would bring stability and growth to the economy, he said. Crude oil traded at above US$81 a barrel yesterday. Mr al Mansouri said the economy grew by an estimated 1.3 per cent last year, a figure that was also higher than the IMF estimate. Although the economy would rebound to stronger growth this year, he acknowledged that GDP expansion was unlikely to reach the levels of before the global downturn.
"We have to accept that in reality things are not going to be as easy as they used to be," Mr al Mansouri said. Record oil prices helped push GDP growth to 7.4 per cent in 2008 before the financial crisis sent crude prices down and triggered a downturn in the property sector. The IMF last month said the country's economy had shrunk by 0.7 per cent last year, and foresaw a growth rate of 0.6 per cent this year, citing Dubai World's $26 billion (Dh95.5bn) debt restructuring as a drag on the economy.
Mr al Mansouri declined to predict GDP growth for Dubai until its Government-owned Dubai World settled its restructuring. The troubled conglomerate should reach an agreement with creditors on the issue, he said. "We concur that oil will be the main GDP driver this year on higher oil prices and higher oil output," said Philippe Dauba-Pantanacce, a senior economist at Standard Chartered Bank in Dubai.
The bank expects growth of 3 per cent this year after a contraction of 0.5 per cent last year. Mr al Mansouri also provided an update on the revised Companies Law, which is expected to allow foreign companies to take a greater stake in businesses they establish in the Emirates. "The next step will be to submit it to the Cabinet, which will be probably within a month," he said. "Our expectation is that it would have to come out during 2010."
The law now requires foreigners to have an Emirati as a sponsor and limits them to a maximum 49 per cent ownership of businesses. The exceptions are free zones, where foreign companies can have 100 per cent ownership. In addition, Mr al Mansouri said the ministry had prepared a draft law intended to protect the interests of foreign investors, and was preparing another draft law allowing foreign investors to do business according to the "fundamentals of justice".
A law designed to promote the industrial sector had also been finalised, he said. Under the UAE's recently completed National Charter, which maps out the growth of the Emirates until 2021, the Government would focus on encouraging growth in industry, small businesses, renewable energy and services to help build a competitive economy and create an attractive investment environment, Mr al Mansouri said.
The non-oil sector contributed about 67 per cent of GDP last year, with the private sector attracting about $35bn in investment between 2008 and last year, he said. The UAE aims to expand its private sector to reduce its dependence on oil. @Email:tarnold@thenational.ae