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UAE inflation of 3% predicted

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UAE inflation of 3% predicted - Property - Real Estate - UAE - Inflation - Marios Maratheftis - Dubai

Standard Chartered is predicting inflation levels will fall to 2-3% this year in the UAE, but warned that the market was still suffering from a lack of liquidity of around Dhs110bn. While 2009 will be a tough year, the bank believes that the Middle East, Africa and Asia will start to recover next year, earlier than markets in western nations such as the US and UK.

The bank's bullish inflation prediction is lower than that of the UAE government for 2009 and far less than the double digit increases experience last year, when the economy was overheating.

With the acceptance that 2009 will be tough, Standard Chartered believes there are positives to take from the downturn.

While money was poured into real estate last year, there is now an opportunity to invest in other areas of the economy, such as finance, tourism and ports. Equally, it is a time to usher in sustainable growth, rather than just having strong growth, said the bank.

Marios Maratheftis, regional head of research, Mena at the bank, said: 'In the past the real estate market was booming. In fact in 2008 the real estate market became a one way bet. People were only thinking of the upside without considering any risk.'

He added: 'The story for Dubai going forwards is about the economy as a whole. It will not be a story just about the housing market. As painful as a correction might be when you are going through it, it is positive for the UAE economy. It's a positive because we're going to see inflation becoming much lower. I'm more optimistic on inflation than UAE officials who are predicting 6-8%.'

However, while the economy will slow down, and is unlikely to fall into deflation, it needs a significant increase in liquidity. The bank believes there is a Dhs110bn liquidity shortfall, despite recent measures to inject money into he system.


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