April 3, 2006	Monday	Rabi-ul-Awwal 4, 1427

United Arab Emirates

THE UAE economy has rapidly evolved from a youthful economy to one that is now showing signs of maturity. At present, oil production is running close to full capacity, the loan-to-stable resources ratio in the banking system is approaching its statutory limits, housing rents are becoming comparable to those in Europe and the US, and equity prices have more than kept pace with the rise in net earnings, the year 2005 was a remarkable year for the UAE economy the UAE is set to gradually move from a stage of spare capacity and accelerating economic growth, to a stage of capacity constraints and steady-state growth the state to further boost the national economy. All economic growth indicators crossed their anticipated ceilings last year.

Following the wise policy adopted by the government, development in the UAE is now at an advanced level. The national economy has also developed tremendously to an international level as it now boasts of numerous competitive factors that strengthen its position at the regional and international levels. International reports indicated that the UAE has made remarkable achievements and qualitative jumps in different walks of life. According to the Human Resources Development Report 2005, the UAE took the second ranks at the Arab level and 41st at the international level. It earned the top slot in the Canadian Frasier Institute index for economic freedom in the Arab World. It ranked second within the Arab World on the International Transparency Report. It even outpaced some Western industrialized nations in terms of economic competitiveness.

According to an IMF report, the UAE economy, driven by high world oil prices and an increase of oil production to over three million barrels per day by 2010, is set to maintain its momentum in the medium term as the Middle East’s third largest economy, after Saudi Arabia and Iran. It is seen as a model for economic success in the region, indicating that its economic growth in 2005 matched that of China. It holds the key for promising Gulf future. Even if oilfields are depleted, future projects in the UAE will no doubt change the landscape of the Middle East and Gulf.

The UAE recorded the second highest real economic growth in the Arab world last year mainly because of an upswing in non-oil sectors, according to a United Nations Report. Growth in real terms, after calculating inflation and value of the dollar, stood at six per cent in 2005, second only to Bahrain which recorded a growth of seven per cent in its real gross domestic product, showed the report by the Economic and Social Commission for Western Asia. Egypt was close to the UAE, with a growth of six per cent while Palestine recorded the lowest growth rate of around 0.4 per cent last year because of tensions and Israel’s economic siege.

The figures showed the UAE’s real GDP peaked at around $87.3 billion in 2005 compared with $82.4 billion in 2004 and nearly $79.2 billion in 2003. In 2002, it stood at around $74 billion while it was estimated at nearly $72.6 billion in 2001. This means the UAE’s real GDP gained a staggering $15 billion between 2001 and 2005 although the increase was much bigger in nominal terms due to a surge in oil prices during that period. In current prices, the UAE economy raced by about 11.9 per cent to Dh424 billion ($115.5 billion) in 2005 following a sharp increase in oil prices to an average $50 a barrel from $36 in 2004. The UAE economy achieved high growth rates compared to other global economies, which also had a positive impact on living standards.

Per capita personal income exceeded Dh61,000, ranking the UAE among those countries with high per capita incomes. The UAE has, since its founding in 1971, achieved rapid economic growth, which is rare among both developing and developed countries.

The UAE’s oil output also soared to one of its highest levels of nearly 2.4 million bpd in 2005 although it remained far below its sustainable capacity since the country is sticking to OPEC production policy. According to the Ministry of Economy and Planning, the non-oil sector performed even better than the oil sector, galloping by 12.1 per cent last year. Growth covered almost all sectors, including manufacturing, water and electricity, services, farming and construction.

The Ministry’s report showed total public and private investment climbed to an all time high of $23.2 billion in 2005. The surge in oil prices and non-oil exports sharply boosted the country’s trade surplus to $25.8 billion last year from around $21.2 billion in 2004. Total oil and non-oil exports hit a record $99.4 billion in 2005 against $82.8 billion in 2004. A surge in oil prices allied with higher exports of non-oil products and services allowed the UAE to record its highest ever current account surplus in 2005 and the balance is projected to remain high this year, according to a Western report. The surplus stood at US$25.7 billion in 2005, more than double the 2004 surplus of around US$12.7 billion.

The report estimated the UAE’s average oil production at around 2.39 million barrels per day in 2005 and expected it to rise to 2.45 million bpd and to a record 2.52 million bpd in 2007. Oil export revenues were estimated at around US$42.5 billion in 2005 and were projected at US$43.1 and US$37.5 billion in 2006 and 2007. The inflation rate is forecast to ease to 5.5 per cent in 2006 from the current six per cent and go further down to 5 per cent the next year.

As oil prices are projected to remain high this year and the UAE’s will maintain high crude output, the current account will again record a surplus of as high as US$22.3 billion although it will slip to nearly US$15.4 billion in 2007. The 2005 surplus accounted for nearly 21.9 per cent of the gross domestic product, one of the highest ratios in the world. Exports are forecast to climb further to US$106 billion in 2006. Imports are expected to hit a record US$65.6 billion in 2006 as a result of a business upswing.