The economy of the world's No. 4 oil exporter has been recovering in 2011 from last year's $25 billion debt restructuring at Dubai's flagship conglomerate Dubai World helped by higher oil output and strong trade flows.
Asked about key drivers of GDP growth this year, Sufyan Daghra, economic statistics expert at the National Bureau of Statistics, said: "The increase in petroleum prices ... and the impact of diversification and other economic activities."
"There was recovery that we can feel in the economic sector," he told a news conference, citing preliminary data.
Real gross domestic product of the OPEC member expanded by 1.4 percent in 2010, after the global financial crisis sent its economy to a 1.6 percent contraction in the previous year.
In 2011, the property sector has remained weak because of an inflow of new developments to the market, and bank lending has stayed slow.
But the UAE has benefited from increasing trade, thanks to fast growth in Asia, and a rise in tourism as the country avoided a wave of regional social unrest, which affected neighboring Bahrain, Oman and Yemen.
The statistics office's projection is more optimistic than a Reuters poll of analysts in September, which forecast the UAE would expand by 3.8 percent this year.
"The UAE has increased oil production by 8 percent in the year to September, so this will contribute substantially to overall economic growth," said Khatija Haque, senior economist at Emirates NBD.
Daghra also said the statistics office might revise the UAE's 2010 GDP data next month following a recent revision by Abu Dhabi, one of seven emirates in the UAE federation, which accounts for 90 percent of UAE oil output.
"We find a great deal of difficulty (with GDP forecasts) in the UAE as a whole given a lack of information about five northern emirates. We base our forecasts on Abu Dhabi and Dubai," said Farouk Soussa, Middle East chief economist at Citi.
UAE consumer prices rose 0.4 percent month-on-month in September, after a 0.1 percent decline in the previous month, partly fuelled by soaring food and education costs, the statistics office said at the same event.
It has yet to release annual inflation data. Inflation slowed to an 18-month low of 0.6 percent year-on-year in August.
"Food prices are relatively easing globally, moving forward we might see this number decrease," said Mahdi Mattar, chief economist at CAPM Investment.
"Inflation is not a worry right now. I don't think we'll see further pressure in the fourth quarter," he said.
Food prices, which account for 14 percent of UAE consumer expenses, jumped by 1.2 percent month-on-month in September, while education costs spiked by 3.8 percent with the start of a new academic year.
Housing prices, which account for 39 percent of the basket, fell by 0.3 percent in September from the previous month, which was the smallest decline in three months.
The Reuters poll forecast annual inflation in the UAE, which has adopted measures to limit food price rises, to accelerate to 2.0 percent this year from 0.9 percent in 2010, which was the lowest annual level since the Gulf war started in 1990.
