The UAE economy will contract in the first half of 2009 before starting to recover in the second half of the year, but only if the government injects more money into the banking system, according to economists at the UK's Standard Chartered Bank.
Marios Maratheftis, regional head of research at Standard Chartered, says that without fresh deposits from the UAE authorities of AED100bn ($27.2bn) into the banking system, banks will continue to ration liquidity which will have a dampening effect on chances of any economic recovery.
“The UAE can see a modest recovery in late 2009 if we see this policy response,” says Maratheftis.
A wider recovery in the Gulf economies will not start until 2010, and will be driven by a resumption of strong growth in China, according to Alex Barrett, global head of client research at Standard Chartered.
“China will start to recover in 2010, which will benefit other emerging markets, including the Middle East," he says.
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