Dubai: The UAE’s economic growth which faced strong headwinds following prolonged low oil prices and slump in international trade has managed a soft landing, with a less pronounced cycle than in 2008 according to According to Bank of America Merrill Lynch.
Analysts expect a convincing a turnaround from 2018, according to recent economic forecasts.
“We expect non-oil real GDP growth to have bottomed out as the fiscal drag eases and infrastructure activity picks up,” said Jean Michel-Saliba, Mena Economist of Bank of America Merrill Lynch.
UAE is estimated to have realised a growth of 3.3 per cent in the first quarter of 2017, as against 4 per cent clocked in the fourth quarter of 2016 on a quarter on quarter basis, as per the Central Bank of UAE, based on their economic composite indicator (ECI) results. The slowdown is attributed to slower growth in oil production during the quarter. Non-oil GDP growth however picked up and grew by 3.1 per cent in the first quarter, while oil GDP growth is forecast to decrease going forward as UAE along with other Opec members have decided to extend production cuts.
Meanwhile, manufacturing data for the non-oil private sector for May 2017 highlighted a slowdown as against the previous month, as the Emirates NBD UAE PMI closed at a level of 54.3 points. Despite the marginal slowdown from April (56.1), new business inflows rose sharply in May.
Employment trends continued to rise across the non-oil private sector in May-17 as companies hired extra staff. On the capital front, total credit facilities further improved to AED 1.47 trillion at the end of the Q1-17, an increase of 1.2 per cent quarter on quarter and 4.8 per cent jump year on year.
According to projections by the International Monetary Fund’s (IMF) World Economic Outlook report, real GDP (gross domestic product) growth in the UAE is forecast to slow down to 1.5 per cent in 2017 from 2.7 per cent last year and recover sharply to 4.4 per cent in 2018.
BofA Merrill Lynch has slightly more conservative forecasts. “We expect overall UAE real GDP growth of 0.9 per cent in 2017, from 2.2 per cent likely in 2016. The headline figure masks a likely contraction in the oil sector due to the Opec deal, but we see non-hydrocarbon real GDP growth picking up to 2.7 per cent in 2017, from 2.3 per cent in 2016. Over the medium term, we expect non-oil growth to increase to 3 to 3.5 per cent on the back of greater Expo 2020 projects,” said Jean Michel-Saliba, MENA Economist of Bank of America Merrill Lynch.
Over the medium-term, analysts expect non-oil growth to increase to 3-3.5 per cent on the back of greater Expo 2020 projects.
After averaging 10 per cent annual growth from 2000 to 2010 and a slump in 2009, Dubai real GDP growth was 4.1 per cent in 2015, but slowed to 2.5 per cent in the first nine months of last year. Growth remains broad-based although the construction sector is the laggard. The fastest growing sectors are restaurants and hotels, electricity, gas & water, transport and real estate.
In Abu Dhabi, fiscal consolidation has slowed down non-oil real GDP growth, but BofA Merrill Lynch expects the drag to fade. Abu Dhabi’s real GDP grew by 2.8 per cent in 2016, from 5 per cent in 2015. Non-oil real GDP growth slowed to just 2.8 per cent in 2016, from 8.6 per cent in 2014.
The Dubai government is projected to record a small budget surplus in 2016, but the fiscal balance is likely to shift to a modest deficit of 1 to 2 per cent of GDP s from 2017 onwards as capex associated with the new airport, new metro lines and Expo 2020 come online.