Budget surplus will remain stable in 2007 - Emirates24|7

Budget surplus will remain stable in 2007

(AFP)   

 

The UAE’s budget surplus is expected to remain stable or grow marginally for 2007 in spite of a decrease in oil production and an increase in development expenditure, analysts have said. At the same time, the non-oil sectors are expected to grow by more than 20 per cent.

The drop in crude production by 481,000 barrels per day to 2.12 million bpd in November has been offset by a dramatic increase in oil prices.

In contrast, Saudi Arabia’s Finance Ministry said it expects the budget surplus to shrink by a third and economic growth to slow in 2007 after it cut production to meet Opec targets.

“The UAE’s budget surplus will not record new highs in 2007. Although prices of Dubai oil have gone up, hovering around $87.79 per barrel and Brent oil at $95.10 per barrel, the rise in oil prices will be somewhat offset by a decrease in oil production and the planned increase in development expenditure,” HC Securities analysts Reem Mansour and Yasmin El Batrawy wrote in a research note yesterday.

The UAE has recorded surplus increases for the past two years, culminating in Dh72.46 billion for 2006 compared to Dh39.47bn in the previous year, an almost 84 per cent rise. Saudi Arabia’s 2006 surplus of $70.6bn (Dh259bn) is expected to fall to $48bn in 2007.

The stable surplus situation for the UAE is helped by the growth in the country’s non-oil sector and increasing foreign direct investment. Gross domestic product is projected to increase by 16.5 per cent in 2007, reaching a record of Dh698bn as opposed to Dh599.2bn in 2006, said the Ministry of Economy.

The International Monetary Fund has projected a slowdown in GDP growth rates over the next five years, dropping to an average of seven per cent per annum during 2008-2012.

The UAE’s main driving force is the hydrocarbons sector, which comprises 37 per cent of GDP in 2006. Future growth is to come from a surge in the non-hydrocarbon sectors such as tourism, construction, industry and trade. “The non-oil sectors are to outperform the hydrocarbon sector, growing by about 21 per cent in 2007,” the HC Securities analysts said.

Inward FDI grew by 10.8 per cent in 2006 to reach Dh68.63bn, Economy Minister Sheikha Lubna Al Qassimi said. “The UAE still grabs investors’ interest even with the climbing rent and housing rates that have driven some expatriates out and was expected to eventually push investors to look for investment opportunities elsewhere,” the HC report said.

The UAE is also investing heavily in other economies in the region. It is the biggest investor in Egypt, clocking $2.7bn in 2006-2007, and the second largest investor in Saudi Arabia, accounting for 20 per cent of the Kingdom’s total FDI.
 
 
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