The United Arab Emirates economy is well placed to weather the financial crisis thanks to government action and will recover sooner than many other countries, analysts and officials said on Sunday.
Heavy state spending means the combined economy of the seven emirates is likely to avoid the worst of the downturn, although intervention has been slow and the UAE central bank has had to help out Dubai emirate, they said.
"Believe me, it (the recovery) will be sooner than many people predict," said Sheikh Nahayan bin Mubarak al-Nahayan, UAE Minister of Higher Education and Scientific Research. "We are fortunate that our government has taken many steps to address the issue" of the economic slowdown. "These policies have kept our country in a reasonably good shape in face of the crisis," he told participants in an economic forum in Dubai.
Like other oil-rich members of the Gulf Co-operation Council (GCC), the UAE has seen its revenues hit hard as oil prices plunged by more than two thirds from record levels above 147 dollars per barrel last July.
But the UAE, boosted by wealthy Abu Dhabi, has amassed huge savings from oil surpluses registered over the past few years and Abu Dhabi has one of the world's largest sovereign wealth funds.
"GCC countries are well positioned, more than others (which lack oil resources)... They started the crisis with ample foreign reserves," said Henry Azzam, Deutsche Bank chief executive officer for the MENA region. "The governments have been quite interventionist. They stepped in with expansionary fiscal policies, monetary policies, deposits (in local banks)... etc," he told reporters on the sideline of the forum.
The UAE government in October acted to support its banks by making available 32.6 billion dollars to expand liquidity and guaranteeing deposits in banks operating in the country. It also cut interest rates.
The government of Abu Dhabi in January pumped a further 16 billion dirhams (4.36 billion dollars) into some of its local banks to boost confidence in the financial sector.