2019: A promising year
As we have entered into 2019, picking up from what was a turbulent 2018, all signs indicate to a promising year of manageable uncertainties for the New Year. Globally 2018 was a complete contrast to 2017. In 2017 most risky assets advanced nicely while in 2019 almost all asset classes have fallen. Here is a quick summary of what the year ahead has in store for the UAE.
Robust growth in 2019
The UAE’s growth extended its robust year on year growth, as it clocked 3.1 per cent for the third quarter of 2018, supported by the oil and non-oil sectors. While oilled gross domestic product (GDP) increased by 2.7 per cent year-onyear basis in fourth quarter, the non-oil GDP is a better indicator of the country’s growing economic diversity and it grew by 3.3 per cent year on year for the same quarter. We also expect oil prices to strengthen in 2019, and provide additional revenue to fund infrastructure spending, which will in turn act as a stimulus for the economy. An in-control inflation (which peaked slightly during the VAT introduction) will also have a positive impact on consumer spending and driving demand and sales, thereby keeping the economy buoyant.
A reshaped Opec
UAE and its allies at Opec also entered 2019 as a modified group, stronger than ever before — as indicated by the gritty determination thorough 2018 in conforming to the self-imposed production cutback strategy to help re-balance the global oil markets and therefore stabilise the prices. With Iran exiting the oil supply chain and with Qatar exiting the group from January 2019, Opec has been presented an ideal opportunity to further recalibrate the markets. Qatar’s exit also works well for Opec as it reduces internal resistance but doesn’t really affect Opec’s overall global influence as Qatar is a very minor player in oil production and within Opec.
Global trade wars
An element of risk for 2019 that cannot be ignored is the growing tensions between the US and China. While the basic rhetoric is only between the US and China, its repercussions will be felt globally. Any tariffs between the countries will directly translate into lower global trade, slower economic growth and directly disrupting the global trade chain — and its impact will be particularly harsh on smaller economies.
The US dollar has also strengthened considerably against a basket of global currencies and this has directly impacted emerging market economies which are dependent on imports. The increase in value of the dollar has also directly impacted heavy oil importing countries such as India, further increasing their current account deficits. If the trade war escalates any further in 2019, it will drastically impact the economies and thereby the global demand and supply sectors.
Key opportunity — Brexit
With the UK preparing to exit the European Union at 11pm GMT on March 29, 2019, and with many indicators pointing to a cliff edge no-deal scenario, the UK will be desperately seeking to establish free trade agreements with the rest of the wider world. The UAE presents itself as a capable top tier partner for the UK post-Brexit, over the shared interests in fields of big data, artificial intelligence, finance, clean energy and consumables.
The UAE is already the fifth largest trading partner for the UK outside of the EU and bilateral trade between the countries can be increased post Brexit. The UAE already holds the best infrastructure in the world to handle the global commerce and finance, and Brexit presents an ideal opportunity for both the countries to work closely from a well-established pedestal. It is pivotal for the UAE to work ahead of the rest of the countries to secure a working free-trade agreement with the UK – after all it’s a mutually beneficial opportunity. It has certainly been an interesting year, and 2019 holds more opportunities for us than ever before to learn and grow.