UAE to see GDP fall 2%

The UAE planning ministry now expects GDP to fall by 2% in the emirates in 2001, and blames the global economic slowdown and slightly lower oil prices for the decline.

However, non-oil GDP will grow by 4.4% this year, says the ministry. And the fall in GDP comes against the background of very strong growth in GDP last year that has given business a big boost in 2001.

But economists pointed out that the ministry may be being too conservative in its assumptions, particularly a $23 per barrel average oil price for 2001 compared with $26.10 achieved last year. Crude oil accounts for around one third of the UAE's GDP and is the largest factor in determining GDP growth.

Such apparently lacklustre GDP growth prospects are mirrored in Saudi Arabia where Saudi American Bank economists are now predicting a 1% gain for the year. Again, the backdrop of a spectacular rise in GDP in 2000 has to be taken into consideration.

As an indicator of just how good 2000 was for growth, the planning ministry also published a separate report showing 8% growth in nominal GDP in Dubai last year which reached $16.4bn, or around a quarter of the UAE's total GDP.

Dubai's economic growth may also prove higher than the rest of the emirates this year, as it oil sector was only worth $1.74bn last year, according to the ministry's figures. Certainly anecdotal evidence from the construction, tourism and services sector suggests that growth has been strong in 2001, and Dubai's GDP growth slowdown may not be as sharp as that seen elsewhere because it is less reliant on oil prices.