The UAE government must continue with its economic stimulus packages and begin to plan how it withdraws support measures from the economy, according to Masood Ahmed, director of Middle East and Central Asia Department at the IMF.

Ahmed, says “The UAE’s stimulus packages have been helpful to the economy, but they need to be sure that they don’t withdraw the stimulus too soon.”

The IMF suggests that the government assesses when the banking system no longer needs access to state funds so that there can be a gradual withdrawal of support.

According to the IMF, the UAE has provided over 4 per cent of GDP in 2009 to help stimulate its economy.

Ahmed also said that there was “still some things to be done in terms of working through the impact of the fall in asset prices on banks’ balance sheets”. The full impact of the crisis on non-performing loans, for example, has yet to be fully accounted for yet, he says.

The IMF predicts that a recovery in the UAE will be slower than elsewhere in the GCC. In 2009 it expects the UAE economy to shrink by 0.2 per cent, followed by growth in 2010 of 2.4 per cent. This compares to a sharper recovery in Saudi Arabia, where growth will rebound from -0.9 per cent to 4 per cent in 2010.

Ahmed added that so far there are no signs of inflationary pressures building up as a problem in the region. “We don’t really see any big indicators for inflation becoming a problem,“ he says.

He added that he expects to see a modest, but sustainable recovery in the Middle East in 2010.