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UAE economy set to surge 4.4% to cross $440 billion

Issac John (associate Business Editor)
Filed on June 19, 2015
UAE economy set to surge 4.4% to cross $440 billion

Non-oil GDP growth seen at 4.4% in 2015 and 4.5% in 2016.

Diversification of the UAE economy has made it less vulnerable to oil price fluctuations, and heightened non-oil private sector performance will be the key factor that drives economic growth. Supplied photo
Diversification of the UAE economy has made it less vulnerable to oil price fluctuations, and heightened non-oil private sector performance will be the key factor that drives economic growth. Supplied photo

Dubai: Robust non-oil activities, greater public sector spending and huge foreign reserves will propel the UAE’s economic growth by 4.4 per cent to $440.18 billion in 2015 from $416.44 billion in 2014, Frost & Sullivan forecast in a study.

“Diversification of the UAE economy has made it less vulnerable to oil price fluctuations, and heightened non-oil private sector performance will be the key factor that drives economic growth,” said Krishanu Banerjee, senior research analyst at Frost & Sullivan.

In the second half of 2015, the UAE economy is projected to grow by 4.5 per cent to record an annual growth of 4.4 per cent in 2015. In 2014, the gross domestic product of the UAE surged 4.3 per cent to $416.44 billion, according to Frost & Sullivan estimates.

“Along with increased non-oil activities, greater public sector spending and a large amount of foreign reserves will contribute to the country’s economic well-being,” said Banerjee.

Frost & Sullivan’s forecast for the UAE is more bullish than World Bank’s latest projection.  In its Mena Economic Indicator report, the World Bank noted that UAE’s real GDP growth would slow from 4.7 per cent in 2014 to 3.1 per cent in 2015 due to a decline in oil prices.

Recently, the International Monetary Fund (IMF) has revised the UAE’s growth outlook for this year and the next to 3.2 per cent. However, the Fund forecast in its latest regional outlook report that the UAE’s non-oil GDP to grow at 4.4 per cent in 2015 and 4.5 per cent in 2016.

Across the Middle East and Africa region, a robust improvement in consumption demand, generous government support, and rise in public sector infrastructure spending are expected to result in steady growth in 2015, said the study that highlights the up trends and downtrends in MEA emerging markets.

However, for Middle Eastern economies, implementing pragmatic macroeconomic policies to stabilise global oil prices at $50 to $60 per barrel is likely to remain a key challenge to revenue growth, said the study.

“Even so, the region is anticipated to witness around five per cent growth this year due to the gradual shift in investment to non-oil sectors. Steady inflation will bolster private consumption and further support the region’s progress,” it said.

Frost & Sullivan study said that owing to favourable government policies and the stable improvement in private sector performance, the Saudi economy saw moderate growth in first half of 2015, despite falling oil revenue. The Purchasing Managers’ Index (PMI) already went up from 58.5 in February to 60.1 in March this year, signifying an expansion in business activity in the non-oil private sector. “Thus, all signs point towards business sentiments staying bullish in the second half for Saudi Arabia.”

In 2015, Saudi GDP is expected to grow at a slower pace by 2.8 per cent to $791.4 billion from $772.07 billion in the previous year. In 2014, the kingdom’s economy grew by 3.6 per cent.

In Egypt, nearly three per cent of growth is expected in second half of 2015 with the GDP reaching $320.97 billion from$ 305.87 billion in 2014.

“Nevertheless, risk factors will remain due to the impending transition in political system that has not yet occurred because the Supreme Court delayed the parliamentary elections. The political uncertainty is subduing demand, which in turn has decreased output in the country’s non-oil private sector and hampered employment. Besides, a weak domestic currency is boosting input costs and a situational turnaround is unlikely in the next six months,” Frost & Sullivan said.

issacjohn@khaleejtimes.com





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