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Abu Dhabi: The pegging of the dirham to the weakening US dollar can play a positive and constructive role in the diversifying economy of the country by boosting the industrial, tourism and real estate sectors, officials said yesterday.
With the greenback hitting historic lows against other major currencies, especially the euro, many economists argue that the trend is to the benefit of the US, which is suffering a huge deficit in its current account.
UAE officials argue that the trend can also be in favour of the UAE's econ-omic growth, given that it takes advantage of the situation.
Competitive prices
"Not only this, but when you have a weakening dirham due to the peg, you also get competitive prices in the real estate sector, and relatively cheaper services for visitors and tourists, which all benefit the economic welfare of the country," Younes Khoury, the undersecretary in the Ministry of Finance and Industry, said.
With the dirham artificially devalued by being pegged to the dollar at Dh3.67, some economists have warned of the impact of the peg on inflation. However, others believe that the impact of imported inflation on inflation is minimal.
"The effect of imported inflation is not significant compared to the effect of the housing market, for example," said Mohammad Ali Yasin, managing director of Shuaa Securities.
"Yet those who can benefit the most from the departure from the peg will be currency speculators who are giving the issue more than its real weight," he added.
"Every policy has its benefits and shortcomings, and the excessive exports from European or Asian countries must be balanced through more exports to these destinations," said Mohammad Ahmad Bin Abdul Aziz, undersecretary in the Ministry of Economy.
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