Deflation wouldn’t depress U.A.E. economy

The United Arab Emirates’s Central Bank Governor Sultan bin Nasser al-Suwaidi said the country would probably experience “low inflation” this year and that any deflation wouldn’t depress the economy.

“Deflation is no problem for the U.A.E.,” he told reporters at the Arab Monetary Fund conference in Abu Dhabi today. “It is an external development but it does not impact the economy here the way it does somewhere else.”

Consumer prices rose 0.3 percent in July from a year earlier, after falling 0.03 percent in June, the economy ministry said on Aug. 27. Inflation across Gulf Cooperation Council states has eased after exceeding 10 percent in five of the six member countries last summer. Oil prices are 55 percent down from their high of $147.27 a barrel in July last year.

The U.A.E. may see negative growth this year, al-Suwaidi said. “It could be slightly negative or it could be slightly positive. If there is going to be any growth it will be very small.” He also said that interest rates will drop “significantly.”

U.A.E. officials have said the economy may shrink this year after expanding 7.4 percent in 2008 as the global financial crisis reduces international trade and curbs oil production, leading to job losses.

The U.A.E. economy will probably grow 3 percent next year after contracting 1 percent in 2009, Samba Financial Group said in July.