The UAE economy rebounded by nearly 3.3 per cent in 2011 and is expected to pick up through 2012 due to a projected rise in its oil output to offset lower crude exports by sanctions-hit Iran, according to the Economist Intelligence Unit (EIU).
Growth in 2011 was more than double the 1.4 per cent rise in the country’s real GDP in 2010 and EIU analysts said the 2011 figure had been revised down because of slackening public expenditure.
“Growth would have been higher in light of the high oil prices and increase in production….. but we have tempered our growth estimate for 2011 because of the slowdown in government expenditure that originated in Q2 2011 and was implemented throughout the remainder of the year,” Ayesha Sabavala, an analyst at MENA section in the London-based EIU, told Emirates 24/7.
Her figures showed the UAE economy, the second largest in the Arab world after Saudi Arabia, would pick up by 3.5 per cent in 2012 on the back of higher oil output. She said the growth forecast remains moderate as EIU expects only a modest increase in oil production at this stage.
“There are reports that the UAE may boost production to increase supply to Asian countries that have cut back on Iran,” she said.
“On the other hand, large increases in production by Saudi Arabia, UAE and other producers may drive oil prices lower given the deteriorating economic conditions in the EU so we forecast that the increase in production will be small.”
She said UAE’s re-export volumes, which form a substantial part of the country’s total exports, especially to Iran, may also decline in the face of US sanctions on the Central Bank of Iran and Iranian financial institutions, which are making it harder for Iranian buyers to obtain trade financing.
“So far, we have not seen any decline in re-export trade with Iran but we might in 2012 as the US targets Iranian financial institutions,” she said.
“To balance the impact of the moderate oil production and possible decline in re-exports to Iran, the service sector--through increased tourism--and government spending-- a recent policy reversal of the cutbacks by Abu Dhabi-- should sustain growth. Due to all these factors, we forecast modest growth of 3.5% in 2012.”
Oil accounts for just below half the UAE’s economy and lower output and prices depressed the country’s GDP by nearly 1.6 per cent in 2009.
According to government data, GDP recovered by 1.4 per cent from around Dh963.5 billion in 2009 to nearly Dh977.3 billion in 2010 The non-oil sector’s contribution to GDP also expanded to around 69 per cent in 2010 from about 66 per cent in 2009.
Real growth in the non-hydrocarbon sector was put at around five per cent in 2010 against a contraction of 4.3 per cent in 2009.
In current prices, the UAE’s GDP expanded by 10.1 per cent to around Dh1,093 billion in 2010 from Dh992.8 billion in 2009. A breakdown showed the non-oil GDP stood at Dh749.2 billion and the oil sector at Dh343.9 billion in 2010.