UAE to remain on growth trajectory

UAE to remain on growth trajectory
FocusEconomics panellists expect UAEto grow 3.5 per cent in 2015, up 0.1 percentage points from June estimate.

Dubai - In 2014, UAE's economy posted yet another robust growth rate by expanding 4.6, an improvement over the 4.3 per cent expansion recorded in 2013.



By Issac John

Published: Fri 24 Jul 2015, 12:00 AM

Last updated: Sat 25 Jul 2015, 11:14 AM

The UAE economy, less vulnerable to oil price fluctuations than its GCC peers, will stay on the growth trajectory in 2015 on the back of brisk diversification and increased government spending as inflation tends to drop to 3.3 per cent on expectation of sustained softening of rents.
FocusEconomics panellists expect the Arab world's second largest economy to grow 3.5 per cent in 2015, which is up 0.1 percentage points from June estimate. For 2016, the panel projects a gross domestic product (GDP) growth of 3.6 per cent, and foresees inflation to average 2.8 per cent.
In 2014, UAE's economy posted yet another robust growth rate by expanding 4.6, an improvement over the 4.3 per cent expansion recorded in 2013.
"Diversification of the UAE's economy has made it less vulnerable to oil price fluctuations compared to its regional peers. 2014's expansion came on the back of an improvement in exports and government spending, while private consumption was lacklustre," FocusEconomics analysts said.
The upbeat forecast was based on economic data from the second quarter which shows that business conditions in the UAE's non-oil private-sector economy continued to improve. Although the purchasing managers' index, or PMI, inched down in June, the rate of business expansion remains strong.
In sum, the UAE is set to continue to perform strongly in 2015 in the backdrop of a favourable business environment as well as an increase in government spending, they argued.
 In May, inflation was stable at April's 4.3 per cent and thus remained at an over five-year high. "The upward trend in inflation that has been observed lately reflects an increase in housing costs. However, looking forward, panellists see inflation dropping to 3.3 per cent on expectations that real estate prices and rents will ease this year. Next year, the panel foresees inflation to average 2.8 per cent."
The expansion of UAE's economy in 2014 came on the back of an improvement in the external sector, while domestic demand deteriorated over the previous year. Private consumption swung from a six per cent increase in 2013 to a 0.3 per cent decrease in 2014, while growth in government spending accelerated from 1.4 per cent in 2013 to 3.7 per cent in 2014.
Fixed investment recorded a 3.6 per cent expansion, which was significantly down from the 8.3 per cent increase observed in the previous year.
 "On the external side of the economy, exports expanded 8.2 per cent in 2014, which marked a significant improvement over the 4.5 per cent increase seen in 2013," they said.
In contrast, growth in imports dropped from 6.5 per cent in 2013 to 6.1 per cent in 2014. The government expects the economy to expand between 4.0 per cent and 4.5 per cent in 2015.
According to FocusEconomics, growth in the Middle East North Africa, or Mena, region is ex-pected to accelerate to 3.4 per cent in 2016, which is unchanged from the previous month's esti-mate.
Qatar is expected to be the best performer in 2015, followed by Morocco, the panelists said.
Among the major economies, along with the UAE, Egypt will likely grow the fastest, with a projected expansion of 4.0 per cent. At the other end of the spectrum, Iran and Yemen are expected to be the worst performers. - issacjohn@khaleejtimes.com


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