Dubai's debt problems damaged the UAE banking sector,
slowing the economic recovery. The emirate still faces a challenge to pay off
tens of billions of dollars worth of debts mainly from state-owned companies
over the next few years.
"No more support is needed for Dubai from the
central bank," Ahmed Humaid Al-Tayer, a member of the Dubai Supreme Fiscal
Committee and Dubai International Financial Centre (DIFC) governor, told
reporters on the sidelines of a financial conference.
"The federal government has supported banks and
there were good results for the banking sector, liquidity and capital
adequacy," he said.
Last year, the UAE central bank subscribed to half of a
$20 billion Dubai government bond program. The oil-producing emirate of Abu
Dhabi and its banks provided the rest after problems at state-owned
conglomerate Dubai World surfaced last November.
The UAE government and the central bank have also taken a
range of steps to raise capital and support liquidity in the banking sector
since the global crisis hit in 2008.
Concerns over Dubai's ability to pay debts in its
companies eased partly after Dubai World reached a deal to restructure almost
$25 billion of liabilities earlier this month.
In an interview with Al-Arabiya television, Al-Tayer also
said UAE banks will not need to book substantially more provisions to meet
losses arising from their exposure to Dubai World debt.
However, some of the emirate's state-linked firms still
face problems paying off loans. The Gulf Arab emirate and its affiliated firms
are estimated to have more than $100 billion in debt.
Al-Tayer also said he expected the UAE's nominal gross
domestic product to exceed 1 trillion dirhams ($272 billion) this year.
That would imply growth of at least 9.4 percent in
nominal terms, according to Reuters calculations, after a contraction of 2.1
percent in 2009.
"The majority of the economy is doing well. There is
growth in the trading sector, exports, tourism," Al-Tayer said.
Analysts polled by Reuters expected the economy of the
world's third largest oil exporter to expand by 2.1 percent in real terms this
year, the slowest pace in the Gulf.
The government sees growth in a range of 2.0-3.2 percent
depending on crude prices.
The market differs from the government in estimates of
the last year's GDP performance in inflation-adjusted terms, with a consensus
for a contraction of 1.4 percent. The government says real GDP grew by 1.3
percent in 2009.
Meanwhile, after experiencing several years of prominent
growth and expansion, UAE's economy has significantly slowed down since
4Q-2008. From 2005-2008, GDP at nominal prices grew at a CAGR of 21.9 percent,
the Kuwait-based Global Investment House (Global) said in a report.
According to National Bureau of Statistics of UAE
reports, the nominal GDP for 2009 decreased by 2.1 percent to reach AED914.3
billion, while in the previous year it experienced a growth of 23.3 percent.
The nonoil GDP increased by 4.6 percent in 2009, while it flourished by 22.1
percent during the previous year. On the other hand, the oil GDP decreased by
15.6 percent in 2009, while 2008 enjoyed a rise of 25.5 percent. That
significant decline in hydrocarbon figures can be directly related to the
diminishing oil prices. The halt in the economy's growth is mostly due to the
global recession, decline in real estate value, and Dubai's debt crisis.
In real terms, the GDP recorded a growth of 1.3 percent
in 2009 to reach AED514.5 billion, compared to a 7.5 percent in 2008. The
reason for the minimal growth in 2009 compared to previous years is the huge
decline in oil prices and in the oil production rate due to OPEC cuts. As a
result, per capita GDP witnessed a 13 percent decline in 2009 to reach $49,150,
compared to $56,530 the previous year. Despite the decline in 2009, UAE's per
capita GDP is second highest among GCC countries after Qatar, the Global report
said.
The contribution of nonoil sectors to the GDP increased
4.6 percent to AED650.1 billion in 2009 after a 22 percent growth during the
previous year. The percentage contribution to GDP was 71.1 percent in 2009 as
opposed to 66.4 percent in 2008, the report added.
