The UAE’s economy, the second largest in the Arab region, is projected to sharply pick up by around five per cent in the next five years because of high oil prices and an expansion in the non-hydrocarbon sector.
Forecasts by the London-based Economic Intelligence Unit (EIU), an affiliate of the Economist Group, showed the UAE’s real GDP would rebound by nearly 3.6 per cent in 2011 from 2.1 per cent in 2010 and a 1.6 per cent fall in 2009.
EIU’s projections for 2011 are slightly higher than the IMF’s 3.5 per cent growth forecasts but below the four per cent rate predicted by the Saudi American Bank Group (SAMBA) in its monthly bulletin for June.
In its country report, part of which was sent to Emirates 24/7, EIU noted that the UAE’s National Bureau of Statistics (NBS) had revised the country’s real and nominal GDP data, showing there was contraction instead of growth in 2009.
“We now estimate that the UAE’s economy grew by around 2.1 per cent in 2010 and forecast that GDP growth in 2011 will pick up strongly, to about 3.6 per cent, owing to high oil production, supported by high crude prices,” EIU’s Middle East director David Butter told Emirates 24/7.
“Real GDP growth is forecast to average five per cent in 2011-2015, much higher than the estimated rate of 3.4 per cent in 2006-2010.”
In its latest report, the Washington-based International Monetary Fund said it had revised up its real GDP growth for the UAE this year, citing Dubai’s recovery, massive spending by Abu Dhabi and high oil prices.
In March, the IMF projected growth for the UAE at around 3.3 per cent. But last month it issued new forecasts putting growth at 3.5 per cent.
In another report this month, SAMBA was more optimistic, projecting growth at four per cent because of higher oil prices and the UAE’s crude output.
SAMBA also expected the surge in crude prices to boost the country’s nominal GDP by nearly $24.5 billion in 2011.
Butter said EIU had maintained a cautious stance on increasing its oil price forecasts drastically, a view that is supported by their recent decline.
But he added price forecasts for 2011 had been revised up to $108.5 a barrel despite the sharp fall in crude prices in early May.
“Oil prices remained at elevated levels in April, persuading us to raise our estimate for the second quarter…..oil prices will decline gradually thereafter, to 83 in 2015, mainly as a result of increased supply from Brazil and Iraq, as well as some OPEC member states, including the UAE,” he said.
“We estimate that world trade grew strongly in 2010, and although it is forecast to slow in 2011-2015, it will lead to an increase in non-oil exports for the UAE. The diversification programme will boost industrial output, with some major projects expected to come on stream in the forecast period. However, the UAE will continue to rely heavily on the hydrocarbons sector.”
Butter said high government spending, especially in Abu Dhabi, and improved consumer confidence would help to boost private consumption in the UAE. Expenditure on domestic infra¬structure projects, industry, ports and airports in the UAE will facilitate non-oil exports towards the end of the forecast period as some projects near completion, he added.
“An almost tax-free environment, good infrastructure and the opportunity to save will lead to a return to high levels of growth in the immigrant workforce in the forecast period, after a fall in the expatriate population in 2009,” he said.
“In the services sector we expect a marginal positive impact on the UAE from the events in Bahrain , which will work in favour of the DIFC, and elsewhere in the region, which could provide a boost for UAE tourism.”