The UAE economy is expected to grow by four percent this year, significantly slower than the previous estimate of seven percent, according to Central Bank Governor Sultan bin Nasser Al Suwaidi. However, the economy minister said the UAE was not looking to inject money into ailing stock markets as part of a wider strategy to face the financial crisis. On the sidelines of European Banking Congress in Frankfurt on Friday, Al Suwaidi said: “The latest estimates I have seen are in the four per cent area from very high, I would say, in real terms seven per cent and in nominal terms around 11 percent.” The governor said that the global financial crisis is putting pressure on every business sector worldwide and the subsequent lack of demand will slow the domestic economy. Al Suwaidi said in his conference speech: “In the UAE, we have ample resources to sustain a sustainable growth rate… we don't need high rates of economic growth.” Lower oil prices and tighter credit conditions would keep the growth rate lower in 2008 and 2009, he added. Crude oil prices fell below $50 on Thursday for the first time since January of 2007. The UAE is the fourth largest oil producer in the Organization of Petroleum Exporting Countries with 2.7 million barrels per day output. The high oil prices and availability of cheaper credit had spurred the economic boom in the UAE led by the real estate industry. The boom translated into high consumer prices with inflation soaring to 11.1 percent in 2007. According to Morgan Stanley, UAE economy grew at 9.4 percent and 7.4 percent respectively in 2006 and 2007 respectively. With growing concerns over global demand as developed economies such as France, England, Germany and Japan sink into recession, commodity prices have since plummeted. Kuwait earlier asked its sovereign wealth fund set up a fund to invest in stocks in a bid to shore up confidence as markets across the Gulf region suffer massive losses. The Qatar Investment Authority is also taking stakes in listed banks. The UAE was not considering taking similar measures to boost markets in Dubai and Abu Dhabi, which have tumbled 65 percent and 37 percent, respectively this year, Sultan bin Saeed Al Mansouri said. “We are not considering it,” he aid. “We are a free market and we are going to keep it open. We are not going to make the same mistakes that other economies have done.” The UAE has taken a number of steps to provide liquidity to banks struggling to cope with a credit crunch and continue to finance regional infrastructure projects. The central bank set up a AED50 billion ($13.61 billion) emergency bank lending facility in September and the government has injected part of a AED70 billion dirham rescue facility into bank deposits. “We have already taken action in order to make sure that the UAE economy will continue to grow in the same way as before,” Al Mansouri said. Cabinet had ordered a committee be formed to “co-ordinate actions taken to manage the situation”, Al Mansouri said, adding that he, the central bank governor and minister of state for finance were among the committee's members. “We are coordinating with government departments and local government to arrive at an action plan to meet the situation,” the minister said. Al Mansouri made the comments on the sidelines of a meeting to launch a three-year economic plan, which he would focus on developing the industrial sector. Industry accounts for 27 percent of the UAE's gross domestic product now and would be the “main economic driver” for the future, the minister said.
