Wealth reserves to shield UAE from global credit crisis

The UAE has accumulated huge wealth during the recent record surge in oil prices which would shield it from the ongoing financial crisis. A report released by Abu Dhabi Commercial Bank said the severity of crisis in UAE is far less than in the West. It said the UAE will continue to record fiscal surpluses in 2008 and 2009 as it has the lowest break-even oil price in the GCC region of $23 per barrel against the IMF’s baseline petroleum price projection of $68 per barrel for 2009. The report said the returns on accumulated wealth relative to the country’s GDP are substantial and can be used to mitigate the effect of oil price cyclicality and support investments in infrastructure and diversification. The rising population and expatriate community will support domestic demand to stimulate growth in non-oil GDP. The report claimed the Asian and emerging economies are beginning to replace Western countries as the UAE’s main trading partners, providing some protection against the worst affects of the downturn. Assuaging fears about Dubai’s debt, it said the emirate’s debt has been backed by foreign asset reserves which leaves the emirate’s capacity unimpaired. The bank also said the recent central bank’s move to inject liquidity in the financial market were precautionary and that the underlying financial system was sound. Waheed Abbas business24-7.ae