UAE Non-Oil Growth Subdued At 3-4%
Non-oil growth in the UAE is likely to continue at a below-trend pace of 3-4 percent for the next couple of years, said a weekly report on GCC economies by the National Bank of Kuwait (NBK) Tuesday.
Data for 1Q 2012 – including on credit, real estate transactions and the PMI survey of private sector firms – were positive, said the economic report. But these may overstate the underlying pace of improvement. Activity is typically stronger early in the year before easing back in the summer, it indicated.
Although gradually recovering, the economy will be held back by concerns over the restructuring and refinancing of Dubai Inc. debt, and ongoing fiscal consolidation, it added. With its strong trade and transport links, the UAE is also more heavily exposed than its neighbors to any global economic turmoil.
IMF estimates suggest that UAE government-related entities (GREs) still have some $185 billion (51 percent of GDP) of debt outstanding, with repayments and redemptions of $25-30 billion (7-8 percent of GDP) due in each of the next 3 years.
The report said this heavy financing schedule leaves GREs reliant upon favorable capital market conditions and decent economic growth to shore-up cash flows and asset values.
Given the uncertain global outlook, these are not guaranteed. Even if the world economy avoids a big downturn, continued consolidation and deleveraging at GREs is likely to remain a drag on UAE growth for the foreseeable future.
Hydrocarbon sector output is forecast to rise 3 percent in 2012 and level-off in 2013, as oil prices remain close to 100 per barrel and Gulf OPEC members seek to guard against potential supply disruptions elsewhere, said the report.
This will leave crude oil output close to its maximum potential of 2.7 million barrels per day (bpd), though capacity is scheduled to rise to 3.5 million bpd over the next few years. Overall real GDP growth is seen at 3.3 percent this year, down from 4.9 percent in 2011, the report concluded.
Meanwhile, according to the UAE’s Ministry of Finance’s annual statistical report on the Gulf Common Market (GCM) 2011 released Tuesday, the number of commercial and residential contracts rose to 44,902 contracts last year, an increase of 32 percent on the previous year.
The number of commercial and residential contracts rose to 44,902 contracts last year, an increase of 32 percent on the previous year, the report noted.
The number of real estate contracts registered by Gulf-based investors increased by around a third to nearly 45,000 last year.
“The UAE has managed to provide many economic and investment opportunities to GCC nationals in 2011, which has helped to attract more to invests in various economic, educational and social sectors. This has enhanced the UAE’s competitiveness across the gulf region,” said Obaid Humaid Al Tayer, Minister of State for Financial Affairs.
The report also revealed that the number of business licenses granted to Gulf nationals to operate in the UAE increased 10.2 percent to 28,909 last year.
The number of Gulf investors who invested in public shareholding companies rose from 208,316 investors in 2010 to 212,020 in 2011, an increase of 1.7 percent.
A strong growth in population, realistic targets for job creation and excellent existing infrastructure make Dubai real estate a worthwhile investment.
Saudi Gazette
