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IMF says emirates recovery faces political risks
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24 May 2011 |
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"Risks to the recovery remain, including from possible economic spillovers of regional events," the IMF said. "In particular, the current re-pricing of geopolitical risk in the region could lead to more challenging market conditions."
Government-related entities, or GREs, are carrying a debt load of more than 100 percent of gross domestic product in Dubai and will have hefty rollover needs for some time, posing fiscal and financial risks for the UAE overall the IMF said.
The UAE is a federation of emirates in the Arabian Peninsula, the best known of which is Dubai, though the capital is Abu Dhabi.
The IMF said short-term policies should be aimed at supporting domestic demand to allow adjustment to the economic spillover from regional events.
"While the central bank will maintain its accommodative monetary policy stance, it should also stand ready to provide liquidity to the market in case the re-pricing of risk in the region triggers a reversal of the recent deposit inflows to the banking sector," the IMF said.
It recommended that government entities limit their borrowing, develop a risk management framework and improve the way their activities are monitored in order to increase investor confidence in their activities.
Though an overhang in real estate and large refinancing needs by overleveraged government entities weigh on the UAE's short-term outlook, the IMF estimated non-oil related growth in GDP should accelerate to 3.3 percent this year from 2.1 percent in 2010.
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Source: beta.thehindu.com |
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