Abu Dhabi's economy remains strong despite the global financial crisis, said a new report by the Oxford Business Group (OBG).

Government spending has risen by 21 per cent to Dh42.2 billion this year, which, the study says, is evidence that the emirate's financial situation is robust, especially in the light of the fall in oil prices.

Social services accounted for 37 per cent of total spending, while education received 23 per cent.

"The Report: Abu Dhabi 2009", which was launched at Emirates Palace hotel, adds that Dh1.2 billion is being spent on the construction sector in the capital.

Oliver Cornock, OBG's Regional Editor, said given the global economic environment over the past 12 months, Abu Dhabi's strong performance and positive outlook meant interest in the emirate had never been greater. "The ability of the government to continue to fund major infrastructure projects and keep to their development strategy will ensure Abu Dhabi is in a very strong position when the global market picks up," he said.

Michelle Solomon, OBG's Country Director, agreed, saying the emirate had won the confidence of the international business community by mapping out and standing by its five-year Abu Dhabi Strategic Plan 2008-2012.

And she highlighted the important role that OBG's partners had played in producing the report.

"Our partners have used their expertise to provide OBG's team with high-level, credible and accurate analysis of Abu Dhabi's economic developments," she said.

"This first-class business intelligence will help ensure that report offers key decision-makers and potential investors the information they require."

Abu Dhabi Islamic Bank CEO Tirad Mahmoud said at the launch of the report: "Abu Dhabi's economy is sound despite the crisis, especially as the government sector is still investing in all areas of the economy. But this is being done calmly and without much publicity.

"The dependence on foreign manpower is not a source of anxiety because the economy's unique nature requires it, manpower is one of the basic components of the economy." Asked about the situation of the emirate's top five banks, he said: "Banks play a basic role in development and they have weathered the crisis. Liquidity has improved a lot and the banks are returning to giving loans, whether to companies or individuals."

He said he expected the gap between bank deposits and loans in the emirate and the rest of the UAE to disappear within six to 12 months.

"There was a major improvement in the level of deposits in the first half of the year and that will lead to a fall in interest rates." The report draws on more than 10 months of field research by a team of analysts from OBG. It assesses trends and developments in all major sectors of the economy, including energy, industry, finance, banking, tourism, transport and real estate, and is available in print form and online.