Dubai Chamber seminar points at economic recovery

Buamim was speaking at the third Economic Seminar of the year at the Dubai Chamber premises on Wednesday. The seminar examined the Recent Export Trends of Dubai, Dubai Chamber Monthly Business Leaders Panel Survey and Indicators of Economic Recovery.

It was attended by the Chamber's members comprising of traders and survey responders and the panel of speakers including Dr Belaid Rettab, Executive Director, Economic Research and Sustainable Business Development Sector of Dubai Chamber.

The export trends of Dubai presentation touched upon the rapid growth of monthly exports of Dubai Chamber members from 1996 to 2008 peaking at almost Dhs25bn in October 2008. However, as oil prices in the world began to slide down, Dubai exports drastically slid down in November, reaching a low of monthly value of less than Dhs15bn and continued to decline in the first five months of 2009 but slowly turned around and went back to the monthly average of over Dhs15bn from June to August.

The trend further indicated that although the level of exports declined the number of exporters and the number of export markets had remained steady as exporters continued their global trading activities, ready to take advantage of market recovery when demand for oil rise and with the expected easing in liquidity conditions and the boost in investor confidence levels, both exports and re-exports are likely to rise further in the coming months ahead.

Buamim pointed at the second topic of the Monthly Business Leaders Panel Survey of July 2009 which showed that expectations for shorter term outlook have fluctuated. However, longer term outlook i.e. for the next three months has shown considerable improvement in the areas of total receipts by companies, total employment and access to financing, which indicate that expectations regarding liquidity are continuing to improve. The net score for the next quarter's outlook has changed from -26% for the May 2009 to a positive 33% in July 2009 survey round.

The survey also indicated that earlier businesses were experiencing limiting factors in areas such as keen price competition, payment default by debtors and low global demand. However, over the past three survey rounds these factors have become less limiting indicating that business are experiencing a slightly more favourable environment as compared to the months of February, March and April 2009.

Finally, the Director General of Dubai Chamber highlighted the presentation on indicators of economic recovery which examined the UAE's economic growth prospects in light of the recent downturn witnessed since mid-2008 and illustrated a number of indicators at the global and national level which demonstrated that there are indeed signs of economic recovery already witnessed which bodes well for a strong recovery going forward.

He further said that the business community has already witnessed a number of positive measures taken by the UAE government such as state guarantees on all bank deposits, the abolition of the minimum capital requirement as well as extension of visas for foreigners who own housing units.

The critical factor which will drive output towards the end of this year and throughout 2010 is likely to be the government's fiscal policies of stimulating the economy (on top of the already monetary loosening and liquidity injections carried out by the UAE Central Bank). That is namely to predominantly increase public expenditure in the construction, transport and the utilities sector in order to increase aggregate demand, employment and hence economic growth.

Buamim referred to the recently released data from the Ministry of Economy which put real GDP at 7.4% in 2008 and informed that both interbank lending conditions as well as loan-deposit ratios too were recovering as banks are now more willing to lend to individuals and businesses as well as to each other. Additionally, the financial market indices have stabilized in recent months suggesting that the challenges facing the financial services sector too was under control.

The presentation further stressed that the easing of liquidity conditions, cheap asset prices as well as improved market sentiment is expected to drive the UAE stock markets in the months ahead and a direct comparison with other countries across the globe, a combination of lower interest rates and an increase in government investment on top of lower inflation rates has meant that the UAE has not only been well-positioned to withstand the downturn but is also clearly in the recovery lane from now onwards.

Buamim proposed a set of recommendations that could enhance the investment environment of Dubai as the Emirate needs to continue to work to achieving a stable macroeconomic environment and thus restoring credibility in the economy; ensure that legislation has a clear interpretation; speed up the implementation of new laws and amendments to existing legislation that will promote output; enhance the business climate; legal framework may be possibly changed to open new economic sectors; expansion of existing free trade zones (FTZs) in Dubai; promote the participation of the private sector and increase the pace of the implementation of privatisation programs critical in boosting GDP growth.

Finally, Buamim highlighted some of the key lessons that can be drawn from this crisis in order to prevent its recurrence. Firstly, governments must do all they can to regain, preserve and foster confidence among households and corporations to pave the way for sustainable prosperity. Regulators need to provide sound supervision within the financial markets and become fully aware of the rapidly changing instruments floating in the financial system. The crisis has exposed how important the interconnections are among the banking system, capital markets as well as the payment and settlement systems as focusing on only one part of the financial system can lead to vulnerabilities that may prove costly for the financial system going forward.

Greater transparency will simply lead to greater confidence. It is clear that the valuation, prices and risks of financial assets needs to improve in order to help generate a more stable financial system. By maintaining a credible and rational monetary policy as well as a balanced fiscal policy then governments and indeed the overall economy will be able to counteract such downturns more timely and efficiently if they were to arise again.

The seminar ended with a question and answer session where the panel of experts answered queries covering the trading trends and future export markets.