Firm oil price, new ownership rules boost UAE non-oil economy
PwC expects a recovery in FDI due to 100% ownership rule
New ownership rules and firm oil prices are boosting the confidence level in non-oil economy of the UAE, despite short-term negative impact from subsidy cuts and value-added tax (VAT), PwC Middle East said in a report yesterday.
“Notwithstanding the impact of VAT and inflation, if oil prices remain buoyant, as seems likely, and regional investment flows are boosted by IPOs and a rise in foreign inflows, non-oil GDP growth in 2018 should be slightly stronger than in 2017 which, combined with flat (rather than reduced) oil production, should result in stronger overall growth for the year,” Richard Boxshall, Senior Economist at PwC Middle East, said in an emailed statement.
The consultancy expects a recovery in foreign direct investment (FDI) due to 100 per cent ownership rule, which may bring about broader improvements in the business environment.
“Gulf countries are rethinking the role of foreign investors as they look to ease fiscal burdens and restructure their economies for the twilight of the oil era, with a strong focus on technology-intensive sectors. This is leading to a series of new investment and companies laws and changes to capital market rules,” Boxshall said.
“There is a similarly encouraging story for portfolio investment, which has already benefited from market reforms and if, as expected, MSCI decides to add Saudi Arabia to its benchmark Emerging Markets Index, this could sharply increase inflows into the region as a whole,” he added.
The MSCI will decide on the emerging market status of the Saudi market by mid-June.