UAE economy in strong position on oil recovery

dubai — First Abu Dhabi Bank (FAB), the UAE’s largest bank, said the second largest Arab economy is in a strong position to take advantage of an improving global economic climate with the federal budget back in the black along with a recovery in oil prices.

In the inaugural Global Investment Outlook report for 2018, FAB said the government has already begun to loosen its purse strings, and work has re-started on a number of key infrastructure projects, which in turn should give the domestic economy a boost.

The report “Going from Strength to Strength,’ noted that the UAE remains the most diversified economy within the GCC with the nonoil sector now accounting for around 69 per cent of GDP. In 2018, the GDP is predicted to grow 3.5 per cent from 1.3 per cent in 2017, the bank said.

“More recently it (the UAE) was the first to rein in public spending, remove fuel subsidies, and open up new sources of sustainable revenue generation, aside from bond issuances, in response to the oil price drop which began in 2014,” FAB report said. The report said liquidity within the banking sector has improved markedly this past year. “Although lending is sluggish, the much-watched real estate market appears to be making a slow but steady recovery, and activity in this sector is likely to pickup as preparations for Expo 2020 in Dubai gathers pace.”

Meanwhile, the increased development and adoption of new technologies, especially ‘Fintech,’ is an important focus for the government and an area to watch in the year ahead, the report added.

On the current global economic and investment environment, FAB is expecting world growth forecasts to be revised upwards, to 4 per cent for 2018, led initially by the developed nations.

The ‘normalisation’ of interest rates should continue to be USled, with Fed funds probably going to three per cent by early 2020 (i.e. approximately one per cent above inflation).

— issacjohn@khaleejtimes.com