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25 February 2024

UAE likely to see real GDP growth of 2.5% in 2010


By Shveta Pathak

The UAE is likely to see real GDP growth of 2.5 per cent this year and double to five per cent next year as risk appetite grows and investments begin to flow into Dubai's real estate sector, analysts said yesterday.

Emirates NBD Chief Economist Tim Fox and Chief Investment Officer Gary Dugan said in a media roundtable yesterday that "an increasing number of our clients have started to put money towards real estate, Dubai's real estate.

"The interest is really huge, its not small money. Investors, who were shying away from committing their money, have once again started to show interest in long-term investments. We have already started to see an upside of Dubai. Our clients have begun putting money in Dubai's real estate.

"We think 2010 is a year of recovery. It is also a year of consolidation and by 2011, UAE GDP growth could reach five per cent".

The Middle East's largest bank by assets yesterday said the region will see recovery this year and the UAE will witness a 2.5 per cent real GDP growth this year.

Positive indicators have already begun to reflect in Gulf economies, they said, adding that they expect "stronger than expected" 2009 results for the region's corporate sector.

"We have seen an increase in risk appetite, people are taking a long-term view. They are more prepared to put their money into equities," he said, adding that GCC economies would be led by higher energy prices and growth in the hydrocarbon sector. Non-energy sector in the region is likely to be boosted by strengthening external demand and higher energy prices, according to the bank.

He said withdrawal of stimulus measures is likely to change the economic landscape and government actions would be in spotlight.

The global economy is now stabilising after an encouraging "V" shaped recovery, thanks to rapid actions by government.

"Increasing oil prices will continue to be fundamental to regional recovery in the short term, with non-energy sectors drawing on demand from outside the region and continuing strong energy prices," said Dugan.

"We anticipate corporate results for 2009 in the region to be stronger than expected, with gradual growth in GDP output across the region."

Regarding oil prices, Dugan said they would strengthen further in short-term. "Demand for oil is improving and we are already seeing Chinese demand rising above its previous cyclical peak. We believe that longer-term increases in the intensity of energy use in India and China will meet limited supply, leading to higher prices. "

On asset allocation, Fox said the bank is positive on equities, especially in emerging markets.

Over the next 12 months, energy, technology and green sectors would see maximum interest with an increased appetite for mergers and acquisitions, he added.

Developed market bonds are unlikely to offer much value in 2010 but emerging market bonds would continue to be well supported, he said.

"The Mena region offers good risk-adjusted returns, with increasing international interest. We believe the regional bond supply is being met by retail demand," he added.


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