UAE most diversified economy in the region
dubai — The UAE remains the most diversified economy in the region and introduction of value added tax (VAT) is a step in right direction, said David Mann, global chief economist of Standard Chartered Bank, in Dubai on Monday at the launch of its global focus report.
The report further states that growth in the region is likely to pick up but remain below trend. The bank forecasts that growth in the MENAP region will accelerate to 3.2 per cent in 2018 from an estimated 2.7 per cent in 2017.
“We expect a broad- based pick-up, with most economies seeing an uptick. In the GCC, we see growth rising to 2 per cent in 2018 from an estimated 0.3 per cent in 2017. The recent rise in global oil prices should cause sentiment to bottom out, and is unlikely to derail policy makers’ efforts to diversify oil-centric economies. We expect interest rates to rise across the MENAP region alongside FFTR hikes; the notable exception is Egypt, where we expect the central bank to continue with gradual easing in 2018,” he said.
Discussing the details of the global report, Dhuha Fadhel, senior economist, Thematic Research, said: “There is a need for institutions to look at fiscal policy reforms with target set for shortterm to long-term goals.”
“We see 2.6 per cent GDP growth in the UAE in 2018. Economic activity is likely to be supported by implementation of infrastructure projects in the run up to Expo 2020 Dubai,” said Bilal Khan, senior economist for Middle East, North Africa and Pakistan (Menap). “Although our 2018 forecast is higher than our 0.9 per cent estimate for last year, we are more cautious on the growth outlook than the IMF’s 3.2 per cent forecast. Despite the UAE’s participation in the Opec+ agreement to limit output (extended until the end of 2018), a low base for oil GDP should support headline growth this year. Nevertheless, broader consumer and investor sentiment are likely to recover only gradually from recent weakness,” he added.
Global perspective
The global growth forecast of 3.9 per cent for 2018 is unchanged since the previous edition of global focus report, a similar pace to 2017.
“Our optimism is justified by the almost universally strong economic sentiment seen around the world in early 2018. However, we are also ‘uncomfortable’ about the global economic outlook in 2018 and beyond,” Khan said.
“First, we see a risk that US disengagement with the world may become more disruptive, as demonstrated by the recent escalation of protectionist measures against China. Second, expected tightening by major central banks following the most aggressive period of G3 balance-sheet expansion in the QE era may cause markets to demand more risk premium. The impact of this on over-leveraged economies must be watched carefully, particularly since it has been so long since funding cost rose significantly. We are also watching local elections in India, and general elections in Mexico and Malaysia,” he said.
— sandhya@khaleejtimes.com