By Issac John DUBAI - A combination of higher than expected oil prices, a strong performance from the trade sector, and expectations of faster regional growth will help accelerate UAE's overall gross domestic product, or GDP, growth to close to five per cent in 2011 and 2012, a leading Gulf bank said. The National Bank of Kuwait, or NBK, also revised up UAE's non-oil economic growth forecast from three to four per cent, and said a lower than expected inflation would boost the country's international competitiveness and support real incomes, benefiting consumer-facing sectors. The bank said positive factors of the UAE "are set against the continued drag on activity from the debt overhang, corporate restructuring, weakness in the construction and property sectors and sluggish bank lending." The bank also revised up growth in hydrocarbon sector output in 2011, from five per cent to seven per cent. "Crude oil output increased by more than 150,000 barrels per day, or seven per cent, between November and March, as OPEC responded to higher oil prices and some member countries increased production to compensate for lost Libyan output. So long as oil prices remain high, further -- albeit more modest increases in output are seen in 2012. As a result of these changes, overall gross domestic product growth is seen at close to five per cent this year and next." The UAE's consumer price inflation dropped from a recent peak of 1.8 per cent in October to just 1.2 per cent in March -- the opposite trend to that expected by most analysts, the bank said. "The fall was driven by lower than expected food price inflation, which stood at five per cent in March. Housing rents are also falling again, reflecting the addition of new apartment supply to the market." The bank said as long as food price inflation continues to decelerate, inflation is likely to remain very low this year, averaging two per cent. "Faster economic growth and the effect of the weak US dollar on import prices could see inflation accelerate next year. But at three per cent, it will remain amongst the lowest in the GCC." The bank said spending would rise only slowly in 2011, as earlier state support measures for the corporate and banking sectors fade and Dubai endures a further round of budget cuts. It estimated that a leap in oil revenues could push the budget surplus back above 15 per cent of GDP for the first time since 2008, at least when the government's off balance sheet revenues -- investment income and profits from state oil company, ADNOC -- are included. For the GCC, real GDP growth is now seen at seven per cent, up from the 5.5 per cent forecast earlier, thanks to the rising oil output, higher government spending and the impact of the recent unrest in the MENA region.

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