UAE to grow 2.9% in 2011: EFG-Hermes

DUBAI — The UAE economy is now projected to grow slower at 2.9 per cent in 2011, investment bank EFG-Hermes Holding said on Thursday.

By Issac John

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Published: Fri 15 Oct 2010, 11:34 PM

Last updated: Mon 6 Apr 2015, 11:42 AM

Lowering its forecast from 3.4 per cent on fewer expected projects in Abu Dhabi and slower spending in Dubai, the investment bank said in a quarterly report: “We now expect a weaker acceleration in real GDP.” It however, maintained its gross domestic product estimate at 1.7 per cent for this year.

The International Monetary Fund said in its recent report that the UAE economy would expand by 3.2 per cent in 2011 and 2.4 per cent this year.

On Wednesday, the UAE Central Bank Governor Sultan bin Nasser Al Suwaidi sounded more bullish about the economy, and described as “reasonable” projections that GDP growth would come in at three per cent to four per cent.

According to EFG-Hermes economists Monica Malik and Mohamed Abu Basha, the lower growth project was based on a slower implementation in Abu Dhabi’s investment programme than expected at the beginning of the year.

The report added growth in global demand for oil and non-oil exports would be slower.

Deleveraging, further restructuring of Dubai companies, falls in real estate prices, and fiscal retrenchment in Dubai should result in a weak domestic demand environment in the medium term, they said.

“We had expected [Abu Dhabi’s investment environment] to be stronger and provide vital support to domestic demand,” the report said.

The report also reduced its oil production estimates for 2011, saying it expected output to remain flat in the first half of 2011, from 2009 and 2010 levels.

“We now only expect to see a smaller output increase” in the second half of 2011, it added

EFG-Hermes said construction in Dubai would continue making limited progress on the back on finishing some ongoing infrastructure projects, like Dubai Metro. “We believe that the UAE’s investment environment, driven largely by Abu Dhabi, is not as strong as the project data suggest. We still see the UAE as having the weakest domestic demand environment in the GCC region, with structural challenges in Dubai adding to this,” the report said.

It said construction in Dubai would continue making “limited progress” on the back on finishing some ongoing infrastructure projects, like Dubai Metro.The report predicted some increase in project activity in the second half of this year following the restructuring of the Dubai World group, mainly its giant property arm Nakheel, which has started paying its trade creditors.

However, the report predicted a contraction in Dubai project activity in 2012 “as short-term projects are completed and future projects are cancelled.”


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