The UAE real GDP is projected to surge by nearly four per cent in 2011 but growth could slow down in 2012 because of lower oil output due to slackening global demand, a key Saudi bank said on Wednesday.
The estimate by Saudi American Bank Group (SAMBA) is higher than the 3.5 per cent growth forecast by the International Monetary Fund (IMF), which itself had revised up its earlier forecasts from around 3.2 per cent.
In its monthly bulletin, SAMBA said high growth this year would be a result of a surge in crude prices and an increase in oil, NGL and gas output.
“However, this will not continue into 2012 as likely lower oil output (as a result of OPEC restraint in the face of weaker market fundamentals) and prices will offset further gains in NGL production….at the same time the projected weakening in global growth and trade will dampen non-hydrocarbons activity, particularly in Dubai’s open economy which has been benefiting from a healthy recovery in trade and tourism,” the report said.
“Overall, higher hydrocarbons output and a revival in tourism, trade and domestic demand, should boost real GDP growth to over four per cent this year, but we now expect this rate to drop back to around three per cent in 2012….looking ahead, it seems that the non-oil sector will struggle to maintain its current momentum in the face of a deteriorating global environment.”
A breakdown showed the oil sector is expected to soar by around 7.2 per cent in 2011 before slowing to 2.9 per cent in 2012. Growth in the non-hydrocarbon sector was forecast at about three per cent in 2011 and 2.8 per cent in 2008.
In current prices, the UAE GDP is expected to leap by 15.5 per cent from $303.2 billion in 2010 to $350.7 billion in 2011 before slipping to $348 billion in 2012.
The report showed the surge in crude prices, which could hit their highest average of at least $100 a barrel this year, would also nearly double the UAE’s current account surplus from 7.5 per cent of GDP in 2010 to 15 per cent in 2011 before falling back to around 6.9 per cent in 2012.
The fiscal balance, which recorded a deficit of 1.4 per cent in 2010, is projected to revert to a surplus of 9.4 per cent this year and 4.8 per cent in 2012.
Inflation, which hit an all time high average of 12.3 per cent in 2008, stood at only around 0.9 per cent in 2010 and could remain as low as one per cent in 2011 before edging up to nearly 1.5 per cent in 2012, SAMBA said.