UAE's GDP to grow 4.2% in 2014

Thanks to the UAE’s strong logistics and infrastructure, the UAE’s GDP is expected to grow at 4.2 per cent in 2014 and 4.5 per cent in 2015, while the country’s exports are expected to grow six per cent in 2014 from $379 billion in 2013.

This is according to a report by Euler Hermes, the leading trade credit insurance provider in the world, and also the headline sponsors of the 2nd Annual Trade Credit Insurance Summit, being held at the Address Hotel, Dubai Mall from October 27-29. Since 2007, Euler Hermes has been present in the UAE in partnership with Alliance Insurance PSC.

"The UAE has generated total exports of $379 billion in 2013 and its exports are expected to grow a further six per cent in 2014, taking advantage of increasing demand from Asia – particularly in India, Singapore, Taiwan and Thailand," said Mahan Bolourchi, Euler Hermes CEO for the GCC countries.

"The UAE economy, the second largest in the Arab world after Saudi Arabia and the most diversified in the Middle East, is continuing on a high growth trajectory. Economic growth is expected at 4.2 per cent in 2014 and about 4.5 per cent in coming years. While the economy grows and new market opportunities increase, so as the market risk factors do, such as higher risk of bad debt, increased payment arrears, fluctuations in cash flow, limited access to funding (SMEs), fast market expansion, and lack of information on financials," said Bolourchi.

He went on to say that Small and Medium Enterprises (SMEs) are particularly at risk because of their limited financial base and liquidity. SMEs need to take short-term credits to meet cash flow requirements, and they also have limited access to finance and quite expensive interest rate. SMEs also face the risks of delayed payment, administrative cost of collecting, limitation of in-house risk management experts, and limited access to reliable information.
 
Bolourchi highlighted the financial consequences of unpaid debt and the importance of trade credit insurance (TCI) in the economy. "A loss or non-payment event can have a devastating impact on a company’s profits. Depending on profit margins, the additional sales required to offset the loss have the potential to significantly slow future growth," he said.

"Trade credit insurance accelerates economic growth. It helps maintain the cash flow which will lead to growing business and increasing trading activities," he said, adding that, "compared to last year, global insolvency index has decreased by eight percent this year. However it is still 13 percent above the pre-crisis level."

When asked whether the UAE should implement Chapter 11 or Insolvency rules for SMEs and corporates with immediate effect, 52 per cent of the TCI summit attendees said they strongly agree with the statement.

74 per cent of the survey participants thought it should be mandatory to have a common regulatory framework for financial disclosure, which would attract more investors to the region.