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UAE Inflation may Fall to 2pc in 2009: economist

“The current deflationary effects will bring down the high inflation in the country, as a positive consequence of the global financial crisis,” Marios Maratheftis, regional head of research- MENA and Pakistan at Standard Chartered Bank, said here on Tuesday while releasing an economic research note on China.

The Minister of Economy Engineer Sultan bin Saeed Al Mansouri, the other day put inflation estimate for the year in the range of 5-8 per cent.

Cheap credits, high food and oil prices, growth in consumption, influx of workers and tourists and housing rents were key drivers in pushing inflation to double-digits. Now, with these factors no more in action, inflation will come down to new lows, Maratheftis said.

He welcomed the UAE Central Bank governor’s recent statement on an economic stimulus plan as big as 7-8 per cent of the gross domestic product.

The Standard Chartered Bank’s economist, who in early last month issued a forecast of 0.5 per cent growth in UAE GDP, said he would not review his forecast because it was already based on the assumption that a stimulus plan will be launched along with measures to ease up tight liquidity conditions in the country.

Comparing with the projected -2.7 per cent growth in US for 2009, he said the UAE will be outperforming many economies by posting a 0.5 per cent growth, reflecting the strength of its economy.

He said that Dubai’s foreign trade will be negatively affected by a contraction in China’s exports by 12 per cent.

Maratheftis predicts an average oil price of $50 a barrel this year, as China which historically used to offset demand in the US by recording a high growth in consumption, may post a zero growth this year, and this will stablise the otherwise collapsing prices.

haseebhaider@khaleejtimes.com