Economy Minister Sultan bin Saeed Al-Mansouri said the UAE, one of the world's top five oil exporters, had faced unprecedented regional and global challenges last year. But he added that it was helped by the rising contribution of non-oil sectors, the ministry's website (www.economy.gov.ae) reported.
Analysts polled by Reuters in December had forecast the economy would grow 3.9 percent in real terms in 2011, after 1.4 percent expansion in 2010.
The economy has been recovering steadily from Dubai's 2009-2010 corporate debt crisis because of high oil prices and strong trade with Asia, though bank lending has remained sluggish and the once-booming real estate sector weak.
The UAE statistics office has yet to release official gross domestic product data for 2011.
Last November, Al-Mansouri said Europe's debt crisis and weakness in the US economy might slow the UAE's growth to around 3 percent in 2012.
"We expect growth to slow to 2.5 percent this year mainly as a result of weaker external conditions - the euro zone crisis and slower global growth generally - but also because we do not see oil production increasing from the 2011 high base," said Khatija Haque, senior economist at Emirates NBD in Dubai.
"We think the growth this year will be underpinned by public sector spending."
The UAE, which enjoys one of the highest incomes per capita globally, avoided social unrest sweeping the Arab world last year but along with other Gulf oil producers it responded by raising public spending, partly on salary and pension hikes.
The government has also announced plans to spend $1.6 billion over three years on expanding water and electricity networks in the northern emirates, which have benefited less from oil and trade than Abu Dhabi and Dubai.
International sanctions against Iran over its nuclear program may weigh on the UAE's economy this year. The International Monetary Fund said in May 2011 that sanctions then in force could shave off 0.2 to 0.7 percent of the UAE's GDP annually; since then, restrictions on bank financing of trade have tightened further.
