The UAE is expected to emerge from the recession this year with real gross domestic product growth of 2.5 per cent driven by strong growth in Abu Dhabi.

That is the conclusion of a major report on the UAE by financial services group Shuaa Capital, which also predicts buoyant stock markets rising by some 20 to 25 per cent.

Aggregate corporate earnings should move ahead by some 17 per cent.

But the report warns that troubled Dubai is still likely to see rents and asset values fall by a further 10 per cent.

'In 2010, and coming from a low base, we expect aggregate earnings to start recovering and record an aggregate growth of around 17 per cent, driven mainly by higher results for the real estate companies,' said Shuaa Capital head of research and chief economist Dr Mahdi Mattar.

'However, we note that these real estate companies, especially Emaar, have incurred large write-offs in 2009, contributing to the slump in aggregate earnings of 2009 and resulting in the high growth in 2010.

'The banking sector will continue to witness slower balance sheet growth as well as deterioration in asset quality.

'However, given the earnings contraction that this sector has witnessed in 2009, we expect meagre single digit earnings growth in 2010,' he said.

'We would like to point out the substantial difference between our forecasts for Abu Dhabi banks and Dubai banks.

'Abu Dhabi banks will witness double digit growth while Dubai banks will suffer either from a continued decrease in earnings or a relatively flattish forecast.'

'Once the Dubai World's debt restructuring negotiations are over, and assuming a relatively investor friendly outcome is reached, the appetite for primary issuance will be restored,' he said.

'After almost a year and half of absence of IPOs, we expect 2010 will see the resurrection of IPOs in the country.

'However, we believe the size of these offerings will be smaller than most issuances we saw in 2008 and significantly smaller than the record-size offerings we saw in 2007, the likes of DP World, Air Arabia and Deyaar.

'We also believe debt issuance, post the resolving of Dubai World's debt issues, will continue to play a key role and their presence will be noticeable,' he added. – TradeArabia News Service