Thursday 16 August 2018

UAE could see a rebound in global trade

UAE non-oil growth to remain resilient this year

WASHINGTON, October 13, 2017

Non-oil growth in the United Arab Emirates is estimated to remain resilient in 2017 while Opec-mandated oil production cuts limit oil growth, said the World Bank in its UAE Economic Outlook - October 2017 report.

However, in the medium term, firmer oil prices, a rebound in global trade and easing of fiscal consolidation are expected to strengthen economic activity, especially as investments ramp up ahead of Dubai’s Expo 2020, reported the Emirates news agency Wam, citing the World Bank report.

“This rebound is faced with several downside risks, including lower oil prices and tighter global financial conditions,” it added.

"Overall, real GDP growth is estimated to further moderate to 1.4 per cent in 2017, down from 3 per cent in 2016. Hydrocarbon GDP growth is estimated to contract by 2.9 per cent in 2017 from 3.8 per cent in 2016 in compliance with the Opec agreement to cut supply. The non-oil sector is estimated to grow by 3.3 per cent in 2017, reflecting higher public investment and a pickup in global trade,” the report said.

"The average rate of inflation increased slightly to 2.2 per cent in 2017 from 1.6 per cent in 2016 partly reflecting utility and gasoline price adjustments, and higher imported inflation, in addition to an uptick in activity. The current account surplus is expected to improve to 2.6 per cent of GDP this year mainly owing to rising non-oil exports.

"Fiscal consolidation efforts in the emirates began in 2015 and continued at a slower pace in 2016. Electricity and water tariffs were increased, fuel subsidies were removed, and capital transfers to Government Related Entities (GREs) were reduced. Despite these measures, the decline in hydrocarbon revenues has pushed the consolidated fiscal balance down from a comfortable surplus of 10.4 per cent of GDP in 2013 to 4.3 per cent deficit in 2016. The deficit was financed through withdrawals from the sovereign wealth funds, bank borrowing and, increasingly, by foreign capital rising.

"More recently the scaling back of capital transfers to GREs bore the brunt of spending cuts. The decline in hydrocarbon revenues was partially offset by increased dividends from GREs and higher fees. For example, Dubai increased parking fees and introduced fees for hotels and airport passengers.

“Abu Dhabi introduced a 4 per cent municipality fee on hotel bills and a 3 per cent municipality fee on the annual value of expatriates’ rental contracts. This is expected to improve the fiscal deficit slightly to 3.2 per cent of GDP in 2017. The current account surplus also fell from 19.1 per cent of GDP in 2013 to an estimated 2.6 per cent of GDP in 2017 owing to rising non-oil exports," the report concluded.

Tags: | UAE | World Bank | non-oil |

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