A decline in oil prices is expected to reduce the UAE's current account balance by 19.70 per cent to $22 billion (Dh80.74 billion) by the end of this year from last year's $27.4 billion, according to the International Monetary Fund (IMF).

This would be 11.8 per cent of the UAE's projected GDP this year, declining from 16.2 per cent of the $168 billion GDP last year.

A decline in oil prices however, will not hamper the UAE's GDP growth which is expected to grow by 10.71 per cent to $186 billion (Dh682 billion) by the end of 2007, the IMF's latest report Regional Economic Outlook (REO) for the Middle East and Central Asia, shows.

This reflect the fact that the country's economic diversification is working well.

"The economic diversification has worked well for the UAE where the private sector is playing a great role," Mohsin S. Khan, Director of the IMF's Middle East and Central Asia Department, told Gulf News in a recent interview.

"Things are looking very well as the contribution of oil in the country's economy has reduced significantly.

"The region's external and fiscal surpluses remain very high, but are expected to decline in 2007. For oil exporters, only one-fourth of the projected fall in the external current account surplus in 2007 is due to lower oil prices."

Revenue projections

Oil export revenues are projected to decline slightly to $570 billion in 2007, based on an average oil price of $61 a barrel, down from $64 last year.

"Naturally, the revenue projections are highly sensitive to oil prices, with a $5 a barrel decline estimated to reduce the region's annual exports by $45 billion, and fiscal receipts by $35 billion," he said.

Among the six Gulf countries, the UAE and Qatar's real GDP growth remains the highest, it shows.

The UAE's gross official reserves, however, are expected to grow from $28.1 billion to $32.5 billion by the end of the current year.

The country's total exports of goods and services are expected to reach $171.3 billion, up from last year's $151.1 billion, a 13.36 per cent increase, statistics show.

At the same time, the country's total government debt will fall to 7.7 per cent of GDP compared to 8.1 per cent last year.

The UAE's import bill is expected to rise 20.63 per cent to $149.1 billion by the end of this year, up from $123.6 billion last year.

Although the region is set for another high-growth year, this may not necessarily be very good news to consumers as soaring inflation and the declining value of local currencies will nullify the gains.

Real GDP growth in the Middle East and Central Asia is likely to average 6 per cent this year for the fifth year in a row, the report said.

The performance of the region's capital markets has been mixed, the report said.

"In the GCC countries, stock market corrections that started in early 2006 have continued, but outflows from these markets have benefited some other regional markets, especially those in the Maghreb countries," the report said.