UAE grows and shows how to beat the odds

There’s comfort in numbers. Data presents the reality, it shores up facts and casts human biases aside. This boosts economic sentiment and the mood of a country. Business and the broader economy rely on numbers crunched by economists and financial analysts for an assessment of the current state of affairs and a broader understanding of what the future holds. And in the UAE, the numbers are looking good. There is optimism in plenty and sound reasons to cheer. Data supports it. The quarterly economic review of the UAE Central Bank says the country grew at 2.9 per cent in 2019, which is higher than its own estimate of 2.3 per cent. This is also way higher than the projections of the International Monetary Fund, which expected the UAE to grow at 1.6 per cent. The fact that this growth rate is being propelled by activity in both the non-oil and oil sectors is significant. The growth this year is pegged at 2.5 per cent and would be largely propelled by government investments made in massive projects such as Expo2020. These should quell any doubts of a slowdown in the emirates and encourage investment activity. Another key point in the central bank review has been the rate of employment. Despite news of redundancies in the financial sector that have been making headlines recently, the central bank has said there is an uptick up in the rate of employment in the private sector by 2 per cent. Understandably, companies have been resorting to downsizing and handing out pink slips to streamline their operations, particularly in the banking and financial sector. Consolidation efforts in this sector has reduced the number of branches by 49 and workforce by 930. But the UAE Central Bank has taken a note of it which should reassure the industry.

The quarterly review is certainly positive, but how much and how quickly it will lift sentiment is something that we have to wait and watch, especially when there are a number of other external factors that weigh heavily on the economy and mood in general. The level of corporate and quasi-corporate debt in Dubai, for instance, remains significantly high. Industry experts estimate it to be at above $100-billion. The recent decision of Dubai authorities to delist shares in DP World point to the geopolitical, economic and financial risks facing the region. A drop in the UAE’s Purchasing Managers’ Index, which is a snapshot of the performance of the non-oil private sector, to 49.3 points is an indication of the worsening business conditions for the first time since 2009. The fast spreading coronavirus could further impact trade figures and volumes. The property market is weathering some rough weather, and will take time to recover. However, government spending on Expo 2020 should revive the market and boost confidence among residents and investors. The central bank’s figures show the UAE can come up trumps despite a global slowdown. Geopolitical risks are a concern, so is the impact of a new virus. But with these numbers, the UAE has shown remarkable resilience and agility to chart its unique growth path and face challenges that come its way.

The quarterly review is certainly positive, but how much and how quickly it will lift sentiment is something that we have to wait and watch