Preliminary data analysed by the Central Bank indicate a decrease, for the second consecutive year, in the trade balance surplus, which reached Dh 11.6 billion in 1998, as compared with Dh 27.2 billion in 1997 (-57.5 per cent). The contraction was mainly attributed to a decline in the value of oil exports (-27.3 per cent) and liquefied gas exports (-23.5 per cent). Despite the increase in values of commodity exports and re-exports by 3.8 per cent and 2.4 per cent respectively in 1998, compared with 1997 levels the total value of exports (oil, gas and other) and re-exports dropped from Dh 124.9 billion in 1997 to Dh 111. 5 billion in 1998 (-10.7 per cent). Interestingly, the value of exports from the Free Zones maintained its upward trend to reach Dh 16.5 billion in 1998, an increase of 12.9 per cent over 1997 levels, while the value of commodity exports dropped by 5.6 per cent as a result of the drop in the value of petroleum product exports whose prices are closely linked with oil prices.

The value of imports, however, registered a new record level of Dh 99.9 billion in 1998, compared with Dh 97.7 billion in 1997. This was mainly attributable to population increase, higher demand for imports to meet re-export requirements and a higher level of individual expenditure partly due to the increased commercial activity associated with the shopping festivals held throughout the year. The increase in value of imports also involved an increase in volume resulting from appreciation of the US dollar and hence the UAE dirham against most major currencies and also against the currencies of the UAE's trade partners in Asia. Low commodity prices caused by fierce competition among Asian countries eager to maintain external markets also had an upward effect on volume.

Data on imports classified by major groups of commodities show that in 1998 consumer goods had a 52.1 per cent share of the market, capital goods 35.6 per cent and intermediate goods 12.3 per cent, these percentages being identical to the 1997 figures.

With regarded to geographical distribution based on import value, European countries had a 35 per cent share of the market, up from 33.8 per cent in 1997. Within this group the UK's share remained the highest, although it fell from 8.6 per cent to 7.5 per cent. Asian countries increased their overall market share by half a percentage point to 45 per cent, however, the US's share decreased from 13 per cent in 1997 to a low of 11.2 per cent in 1998.

Economic Trends 1999-2000

GDP at current prices is expected to grow by about 5.2 per cent in 1999 to Dh 185.08 billion, according to a study by the Research and Studies Department of the Abu Dhabi Crown Prince's Court released in mid-July 1999. This is significantly higher than earlier forecasts due to improved oil prices and more sustained growth in non-oil sectors. The study also estimated a 2.6 per cent increase in 1999 GDP at fixed prices to Dh 160.94 billion.

Average per capita income at current prices was estimated by the study at Dh 62,957 in 1999 and forecast to be Dh 63,471 in the year 2000. Government revenues were projected to reach Dh 53.06 billion in 1999, of which Dh 35.31 billion were estimated to be revenues from oil exports. Expenditure is expected to reach Dh 77.35 billion, resulting in a budget deficit of Dh 25.6 billion, or 13.8 per cent of GDP.

Other forecasts for 1999 predict that import growth is likely to slow, but public spending on both current and capital items will push the import bill up to over Dh 128.49 billion by the year 2000 despite lower import prices from Asian suppliers. However, strong growth in other exports and re-exports will boost export values by 8 per cent a year in 1999 and 2000.The trade surplus is expected to rise to nearly Dh 25.70 billion by 2000 and investment income continue to grow. The current account balance is projected to increase to Dh 25.32 billion in the year 2000 and its ratio to GDP to rise to 13.2 per cent.

At the time of writing the continued strength of oil prices would suggest that oil exports could well exceed Dh 40 billion despite the UAE's decision to cut oil output by more than 300,000 barrels per day in line with an OPEC agreement to trim production to stabilise supplies and support prices. The agreement has already pushed prices up by nearly 100 per cent and the price of UAE crude oil is projected to average more than US $15 in 1999

Into the new Millennium

The UAE is expected to increase its industrial diversification drive in the new millennium. Emphasis on development of the finance, trade and services sectors will also be accelerated. Globalisation will encourage the formation of larger banking units through mergers while the move towards emiratisation will also gain momentum.

Having invested heavily in infrastructure since the establishment of the state, the Government is actively encouraging the private sector to participate in further infrastructure development in transport, communications, telecommunications, energy and ports. Private sector investment in industry, involving public shareholding, inflow of foreign capital and technology transfer is expected to increase. New corporate, stock market and banking legislation, a review of the laws governing economic activity and the development of additional legislative and administrative frameworks that promote efficiency and transparency will be key factors in economic development.