S&P: Growth to pick up in Sharjah, Ras Al Khaimah
It will be driven by increased activity in construction, real estate, tourism and manufacturing sectors
The emirates of Sharjah and Ras Al Khaimah (RAK) will see acceleration in growth, driven by increased activity in construction, real estate, tourism and manufacturing sectors.
The emirate of Sharjah will see gradual recovery in its economy in 2018-21, supported by a pickup in construction, tourism and manufacturing sectors, global ratings agency S&P said on Saturday. It expects Sharjah budget deficits to reduce in the next two years.
S&P expects an acceleration in GDP growth in 2018, based on increased economic activity in the real estate and construction sectors and the spillover effects of rising investment in Dubai in relation to Expo 2020.
It projects improvement in the fiscal position of the emirate over the next two years, supported by various revenue-raising measures and increased transfer payments from government-related entities.
The ratings agency estimates a deficit of 1.8 per cent of GDP in 2018 compared with 2.2 per cent in the previous year. Consolidated fiscal revenues will increase by about one percentage point of GDP to 10 per cent of GDP in 2018 and are expected to remain close to that level till 2021.
According to S&P, Sharjah government debt increased to 17 per cent of GDP in 2016 from less than 10 per cent in 2014.
"We forecast the government's net debt will reach about 20 per cent of GDP by 2021-end," it said in a note on Saturday.
RAK ratings affirmed
Meanwhile, Ras Al Khaimah (RAK) will continue to record fiscal surpluses and maintain its low debt level, S&P said.
"We affirm our ratings on RAK at 'A/A-1'. The stable outlook reflects our expectation that RAK's economic performance will improve gradually over the period to 2021, supported by a recovery in domestic demand regionally and a high level of capital spending in the larger emirates."
The ratings agency estimated that the emirate's economic growth slowed to 1.5 per cent in 2017 due to weaker domestic demand in Abu Dhabi and Dhabi. But it expects gradual rise in GDP growth, supported by recovery in regional demand and the high level of capital spending in the larger emirates.
"The stable outlook reflects our assumption that RAK's economic growth will pick up gradually in the coming years and its fiscal position will remain strong over the period to 2021."
Manufacturing, including activities in the free trade zones, contributes 36 per cent to RAK's GDP, followed by wholesale and retail trade and the quarrying industry at nine per cent and eight per cent respectively.
"We expect RAK's economic expansion will accelerate until 2021, with GDP growth averaging 2.5 per cent in 2018-2021. This reflects our expectation that a modest increase in oil prices compared with 2017 will support regional demand, while an acceleration of business activities ahead of Expo 2020 in Dubai, and capital spending in Dubai in relation to the exposition, will support stronger medium-term growth," S&P said.
It expects RAK's fiscal surplus to average two per cent of GDP in 2018-21. It projects government budget surplus of 1.5 per cent of GDP in 2018, up from about one per cent in 2017. The emirate's debt burden remain low and gross consolidated debt is projected to decline to about 17 per cent of GDP by 2021.
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