This could be attributed to the failure of local demand to accommodate the huge expansion witnessed by almost all economic sectors in the past. This unprecedented investment boom led to a huge oversupply in all sectors at a time when the population growth rate was slowing for a number of reasons. These were led by government restrictions on importing labour, while demand retreated as a result of shrinking re-export markets and a decline in 'shopping tourism' among visitors from CIS countries. There is a clear oversupply in all sectors, and it seems that the feasibility studies undertaken in this respect did not take this into consideration, resulting in an unjustifiable disappointment among investors who based their forecasts mainly on the hope of the continuous record demand growth rates witnessed during most of the nineties. Obviously, such forecasts were not realistic.
Government officials consider the present economic slowdown as an 'unavoidable correction'.
Ahmed Humaid Al Tayer, the Minister of Communications, expressed the same opinion when he recently described the present slowdown as a 'correction following strong growth rates witnessed by the economy from 1991 to the end of 1997'. The Minister pointed out that an economic upturn by the end of this year depends on adopting financial and monetary policies addressing the causes which led to the slowdown. It is noticed that growth rates are slowing down in a phenomenon which would not possibly get better overnight. Oil revenues did not increase at the same pace as prices, because the price increase came against the backdrop of reduced production, and therefore, oil revenues were not substantially higher. And if we compare the equation of prices with quantity it would become obvious that there was no sizeable difference in revenues.