Corporate earnings in the UAE is expected to return to growth this year, after having declined in 2010, according to Kuwait Financial Centre (Markaz).
"We expect corporate earnings to return to growth in 2011; after declining by an estimated 6 per cent in 2010, we expect growth at 24 per cent in 2011," Markaz said in its report titled 'What to expect in 2011?' noted.
However, Markaz expects all sectors to show declining growth in earnings in 2010, except banks, which it expects to gain 11 per cent.
"A further drag on aggregate earnings in 2010 would come from the telecom sector, which is expected to show a decline of 16 per cent in earnings for 2010. In 2011, we expect banks to show a growth of 32 per cent with a moderate return to growth in real estate and construction," the report noted.
The [UAE] economy fell short of its 3 per cent real GDP growth for 2010 and managed an estimated growth of about 2.4 per cent, which is expected to increase to 3.2 per cent in 2011, it noted.
Inflation was at 2 per cent in 2010 and is expected to bump up to between 2.5 per cent -- 2.8 per cent in 2011 as economic growth picks up. Additionally, the geopolitical and regulatory arenas are considered to be stable. However, lack of liquidity remains a problem as value traded in the UAE continues to dry up, Markaz noted in its report.
The UAE is expected to run a deficit of $800 million in 2011 with a projected 8 per cent decline in revenues. Abu Dhabi is expected to decrease its contribution to the federal budget by 19 per cent to $3.16 billion in an effort towards balancing its own budget.
Dubai's contribution to the federal budget is expected to remain at about $330 million in 2011, it said.
The report also noted that the debt issues in the UAE would continue to be a drag on economic growth as banks provisioned against possible losses and remained wary of funding new projects.