V-shaped economic upturn expected in Dubai next year

Emirates Business 24-7, 08 October 2009As economic recovery gains steam, a top official of Dubai Chamber of Commerce and Industry (DCCI)Dubai Chamber of Commerce and Industry (DCCI) expects to see a V-shaped recovery in the UAE next year."Our research indicates that the UAE will see a robust growth in 2010. The decline in the country's GDP will be limited and we expect a V-shaped recovery next year," said Hamad Buamim, Director-General of Dubai ChamberDubai Chamber."[The] impact on Dubai was not as severe as it was expected to be," he said, adding that "long-term outlook has improved considerably and expectations of liquidity and access to financing also look better."His view is shared by leading analysts in the country."On current trends, it looks as though we are on a V-track recovery in terms of national income. A low baseline effect will also flatter annual growth figures from the fourth quarter onwards," Dr Giyas Gokkent, Chief Economist of National Bank of Abu Dhabi (NBAD), told Emirates Business.Talking about the W-shaped recovery, he said: "W is the possible double dip in economic activity that may occur once one-off stimulus/policy measures end. Policymakers are displaying a strong preference to err on the side of growth."Early reversal in the policy course appears unlikely for the time being. It would have been easier to have greater conviction on a V-shaped recovery if the crisis had been country specific," said Gokkent.Worldwide, many experts are claiming that the worst is far from over. Most recently, Michael Geoghegan, Chief Executive of HSBC, said he fears a second downturn and is cautious about growing too fast.The UAE, which is linked to global happenings, will reflect what happens on the broader scenario but could be more buoyant."The UAE is interlinked to the rest of the world through a number of channels. One link is oil. The United States accounts for 25 per cent of global oil consumption, while roughly 30 per cent of UAE nominal GDP is based on hydrocarbon activity."Another link is exchange rates. A potentially stronger dollar would translate to a stronger dirham versus major currencies and could be detrimental to non-oil economic activity."A third link is interest rates. The fixed exchange rate of dirham vis-à-vis the dollar means that under normal circumstances interest rates in the UAE mirror those prevailing in the dollar markets."
By Shuchita Kapur
© Emirates Business 24/7 2009