UAE set to be best Mena performer in 2017-18
The UAE's GDP value is expected to triple in 10 years from 2016.
Dubai - Budget adjustments, more concerted efforts toward economic diversification needed in region
The UAE is on track to emerge as the best-performing economy in the region in 2017-18 amid the weakest economic growth the rest of the Middle East and North Africa region is poised to record, economists forecast.
While Saudi Arabia and other regional economies are likely to see subdued growth for the most of the year, the UAE is expected to buck this trend going into 2018, the latest outlook from Capital Economics said.
Overall, while the average growth in the region is likely to weaken to 1.5 per cent in 2017, the UAE, however, "should embark on a gradual recovery in the coming quarters and is likely to be the best-performing economy in the Gulf in 2017-18".
Sultan bin Saeed Al Mansouri, Cabinet Member and UAE Minister of Economy, has said the UAE's GDP had tripled in the past 10 years, climbing from almost Dh511 billion in 2006 to Dh1.58 trillion in 2015.
The figure is expected to reach Dh1.8 trillion by the end of 2016 and triple in 10 years while the non-oil sector's GDP contribution in 2015 rose to about 77 per cent at current prices and 70 per cent at constant prices.
Dr Natalia Tamirisa of the International Monetary Fund said on Wednesday that oil-producing regional economies - GCC countries and Algeria - will see a drop in oil prices and may have to face the possibility of economic stagnation in the medium term. This will require budget adjustments and more concerted efforts toward economic diversification.
Dr Tamirisa, speaking at the Arab Strategic Forum, said measures which oil-producing countries have been implementing, such as cost-cutting and budget-rationalisation could have negative implications. Governments should consider developing sectors such as tourism, industry and transport, among others. Many have made significant progress by decreasing subsidies for electricity and fuel and launching projects aimed at economic diversification, a feat not easily attained, and one which requires spending reform.
"GDP growth in oil-exporting countries will be slower than that in developing countries, and they will face many challenges in the coming year, but these countries must provide the light at the end of the darkened tunnel," said Dr Tamirisa.
Capital Economics noted that dollar pegs in the Gulf would remain in place "but that means policymakers will be forced to follow the US Federal Reserve and hike interest rates."
London based BMI Research, a Fitch Group company, said all six GCC economies will experience a sharp slowdown this year and over 2017, although the UAE and Qatar will outperform the others.
"From 2017, there is expected to be a notable divergence in growth across GCC states, with the UAE and Qatar outperforming and Saudi Arabia lagging behind.
The UAE will see a notable pick-up in growth next year, to 2.8 per cent from the 2016 low of 2.2 per cent. In part, this is because the country is more diversified from oil than its GCC peers, said BMI report.
FocusEconomics panelists expect the UAE GDP to rise 2.4 per cent in 2016. In 2017, the panel sees GDP growth accelerating to 2.6 per cent.
"Still low oil prices and reduced government spending will continue to constrain the economy next year, albeit to a lesser extent. The well-developed non-oil sector will continue to sustain growth, though not at its full potential due to weak regional and global demand," it said.
In Kuwait, economic growth is expected to remain weak due to the "fractured" political environment despite a strong balance sheet, while Qatar is also may stay sluggish as fiscal policy becomes more restrictive and credit growth eases as Bahrain and Oman will "underperform" their Gulf peers, analysts said. -firstname.lastname@example.org.