The International Monetary Fund (IMF) expects the United Arab Emirates economy, the Arab world's second largest, to grow by 3.25 per cent this year. But it also cautions that regional turmoil could have an economic spillover effect.

“The economic recovery is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty", said a statement of the IMF.

The International Monetary Fund made the assessment late Monday following consultations in the UAE.
It says the economy faces potential challenges from tougher assessments of political and sovereign risks stemming from ongoing uprisings in the region, as well as a glut of empty Dubai property that is dragging on growth.

“For example, the current re-pricing of political and sovereign risks in the region could lead to more challenging market conditions. The excess supply of property in Dubai and the uncertainty regarding its size will continue to weigh on growth", added the statement.

According to the IMF, non-oil GDP growth is projected to accelerate from 2 per cent in 2010 to 3.25 per cent in 2011, reflecting strong tourism, logistics, and trade in Dubai; and large public investment spending in Abu Dhabi.

The IMF praised the UAE's plans to upgrade infrastructure in poorer parts of the country, and urged it to consider other measures to help lower-income households and extend job-creation efforts.