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29 March 2024

IIF sees Dubai GDP growth at 5.6% this year

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By Reuters/Staff

Dubai economy is expected to grow by 5.6 per cent this year, the Institute of International Finance (IIF) said in its latest forecast for the region.

In its latest report on regional economies, the IIF noted that macroeconomic prospects remain favourable for the Gulf Cooperation Council (GCC) countries, and it estimated the GCC’s growth will average 4.2 per cent in 2014.

The IIF did not change its growth estimate for the UAE of 4.7 per cent for 2013. 

“We see Dubai growing at 5.6 per cent in 2014, driven by tourism, transportation, and trade,” said Garbis Iradian, deputy director for Africa and the Middle East at the IIF. “Leading economic and financial indicators for the UAE in the first quarter of this year point to a further acceleration of non-hydrocarbon growth to 5.2 per cent in 2014,” he said.

The IIF also expected inflation to rise for the UAE from 2 per cent in March 2014 to 3.6 per cent in December 2014, on the back of a significant increase in housing and related costs.”

The IIF’s analysis also suggested that the probability of a correction large enough to generate major macroeconomic and financial consequences for the UAE seems fairly low in the near term. If house prices continue to rise at a rapid pace, the UAE’s central bank will need to further tighten macroprudential policies, the agency said. 

Robust Regional Growth

Regional growth moderated from 5.5 per cent in 2012 to 4.2 per cent in 2013, largely due to a slower rise in crude oil production. Non-hydrocarbon real GDP growth, a more representative measure of economic activity, remained robust at 5.4 per cent in 2013, driven by higher public spending and stronger private sector activity, the IUF said in a report today.

Overall growth is projected by the IIF to remain around 4 per cent this year due to continued restrained oil production to accommodate increased oil supply from the US and Iraq, and tepid global oil demand.

“GCC countries will need to make further progress in economic diversification through structural reforms to reduce dependence on hydrocarbons,” said George Abed, senior counsellor and director for Africa and the Middle East at the IIF, speaking at a media event today.

“These countries have made notable progress, undertaking massive investment in physical and social infrastructure, but much more remains to be done,” he said. “As a result, the hydrocarbon sector’s contribution to GDP has declined steadily, but the budget dependence on oil revenues continues to be high. Potential fiscal stress could arise over the medium term if oil prices soften markedly while government spending continues to rise.”

Assuming an average Brent oil price of $105 per barrel in 2014 (as compared to $108 per barrel in 2013), the GCC’s external current account surplus, while declining, is expected to remain large at $287 billion in 2014. The consolidated fiscal surplus will also narrow from 10.6 per cent of GDP in 2013 to 8.3 per cent in 2014, reflecting slightly lower oil prices and higher expenditures.

As a result of the continued large surpluses, the IIF expects to see gross financial assets rise to $2.8 trillion by year-end. With relatively little external debt, the region’s net foreign assets would rise to $2.3 trillion (137 per cent of GDP) by end-2014.

Dubai to grow around 5%: Al Muhairi

Dubai's economy is expected to have grown at around 5 per cent in 2013 after a roughly 4.5 per cent expansion in the first nine months, the emirate's statistics office head said on Monday.

"It is expected that growth, according to available information, will reach around 5 per cent in 2013 compared to 2012,"  Arif Obaid Al Muhairi, Executive Director, DSC, said on the statistics office's website.

"We expect that the current year will witness growth close to these rates," he said.