Econ­omy poised for growth pick up

EFG-Her­mes ex­pects im­prove­ment in non-oil with Dubai set to lead re­cov­ery

The National - News - Business - - Front Page - Mah­moud Kassem mkassem@thena­

The UAE’s econ­omy will turn the cor­ner next year, with growth out­strip­ping 2017, thanks to im­prove­ment in the non-oil econ­omy, ac­cord­ing to the Egyp­tian in­vest­ment bank EFG-Her­mes. EFG-Her­mes ex­pects the econ­omy to slow this year amid con­tin­ued lower oil prices and the dif­fi­cul­ties small and medium-sized en­ter­prises are hav­ing in ad­just­ing to the new eco­nomic re­al­i­ties. As a re­sult, real GDP growth is ex­pected to slip to 1.1 per cent this year from 3 per cent in 2016, the bank said yes­ter­day. Next year, how­ever, the econ­omy is ex­pected to ad­vance by 3 per cent. “We see the pick up in eco­nomic ac­tiv­ity gain­ing more pace over the com­ing pe­riod, driven mostly by Dubai’s ex­pan­sion­ary fis­cal stance, prepa­ra­tions for Expo 2020 gain­ing pace and Abu Dhabi’s re­ced­ing fis­cal tight­en­ing,” said Mo­hamed Abu Basha, an econ­o­mist at EFG-Her­mes. “Over­all, GDP growth is likely to de­cel­er­ate this year in light of lower crude pro­duc­tion in com­pli­ance with Opec sup­ply cuts.”

Opec and a group of coun­tries led by Rus­sia have agreed to ex­tend a six-month global oil out­put cut that ends in June into the first quar­ter of next year to prop up oil prices.

Cit­ing higher tourist ar­rivals, a rise in Dubai prop­erty trans­ac­tions, an in­crease in govern­ment spend­ing on projects ahead of Dubai Expo2020 and Abu Dhabi’s re­lax­ation of aus­ter­ity, the Cairo-based bank said it ex­pects the coun­try’s non-oil econ­omy to ad­vance 3 per cent this year and 3.5 per cent next year. Last year, the non-econ­omy grew by 2.7 per cent, the bank said. When it comes to where the growth will be com­ing from, Mr Abu Basha said that most of it will come from Dubai rather than Abu Dhabi be­cause the former is less reliant on oil prices than the lat­ter. The UAE econ­omy’s growth has slowed in re­cent years due to the col­lapse in oil prices that started in sum­mer 2014. As a re­sult, gov­ern­ments and com­pa­nies have cut back on spend­ing on projects and slashed jobs. Con­sumers be­came cau­tious about spend­ing money, fur­ther damp­en­ing growth. How­ever, a re­bound in oil prices since Novem­ber has im­proved busi­ness con­fi­dence in the emi­rates, while an uptick in global trade has made econ­o­mists, in­clud­ing those at the IMF, more up­beat about the lo­cal econ­omy.

The non-oil econ­omy is set to re­bound this year on stronger global trade and in­vest­ment spurred by Dubai Expo 2020, the IMF said this month.

Non-oil GDP is fore­cast to ex­pand at 3.3 per cent this year with the bud­get deficit shrink­ing to 4.5 per cent of GDP, it said. Over­all, the econ­omy will ex­pand by 4.4 per cent next year from 1.5 per cent this year, ac­cord­ing to the fund. Mr Abu Basha also cited an im­prove­ment in key eco­nomic in­di­ca­tors for the UAE, such as the monthly pur­chas­ing man­agers’ in­dex, as a rea­son be­hind the in­vest­ment bank’s re­newed sense of op­ti­mism. A gauge of the Dubai econ­omy showed that the emi­rate’s busi­ness con­di­tions im­proved in March amid gains in out­put, new or­ders and em­ploy­ment.

Whole­sale and re­tail, travel and tourism and con­struc­tion in­dus­tries led the ad­vance on the Emi­rates NBD Dubai Econ­omy Tracker in March, cap­ping the in­dex’s strong­est quar­ter since the first quar­ter of 2015.

Mean­while, tourism has also been on the rise. In the first three months of the year, Dubai hosted 4.57 mil­lion tourists, up by 11.5 per cent on 4.1 mil­lion from a year ear­lier. The growth was more than dou­ble the rate reg­is­tered in the same pe­riod last year.

Visi­tors from In­dia, Saudi Ara­bia and the UK ac­counted for one-third of the to­tal num­ber dur­ing the pe­riod, with In­dia be­com­ing the first coun­try to record al­most 580,000 visi­tors in any quar­ter, ac­cord­ing to Dubai’s Depart­ment of Tourism and Com­merce Mar­ket­ing.

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