UAE economy: Stronger than expected
Published 17 June 2014
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0.1 Detail
According to data published by the UAE National Bureau of Statistics (NBS) the country’s economy expanded by 5.2% (yoy) in real terms. This is higher than the most recent IMF forecast of 4.8% published in April this year. The NBS also revised up 2012 growth from 4.4% to 4.7% and 2011 growth from 3.9% to 4.9%. At a more granular level, the economies of the UAE’s two largest emirates were driving the UAE’s growth. Abu Dhabi’s economy also expanded by 5.2% (yoy) reaching $193bn in 2013 (for information and to give a sense of perspective, the latest IMF 2013 nominal GDP estimate for the UAE is $402bn), while Dubai Statistics Centre (DSC) forecasts that Dubai’s economy grew by close to 5% (yoy) in 2013 (comment: the latest available data from DSC suggests that a solid 4.5% growth was achieved during the first nine months of last year, so Q4 must have seen exceptionally strong growth).
Growth by sector
The UAE’s non-oil sector remained an important contributor to the UAE’s economic development and expanded by 5% (3% in 2012). Overall, it contributed to 68% of the total federal GDP. Oil sector growth stood at 5% last year (8% in 2012) and was supported by consistently high oil prices averaging USD 106 per barrel in 2013.
“Real estate and business services” and “trade” (both accounting for 12% of GDP) were the largest non-oil contributors to the federal GDP in 2013. However, their growth decelerated between 2012 and 2013. The sectors which experienced stronger growth were “construction” (4% in 2013, the first expansion since 2009), “hospitality” (7% in 2013 from 5% in 2012) and “financial services” (9% in 2013 compared to 3% in 2012). “Construction” benefited from the favourable economic conditions: stalled projects worth more than US$12bn allegedly resumed in 2013, therefore impacting the 2013 figures positively, and with more expected to be approved during the second half of 2014.
Dubai’s ports and free zones are buzzing and the emirate has taken tangible steps to reduce its debt burden . Hotel occupancy, which is often used as an indicator of the overall health of Dubai’s economy, is said to have climbed back to pre-crisis levels, reaching 89% in March this year and 81% over 2013, despite an increased supply of rooms of around 10%. More mega projects are expected to support Dubai’s growth in the future. Expo 2020 for example, which is reportedly expected to create 300,000 new jobs, will boost consumption and is forecast to add 0.5 percentage points per year, on top of a real GDP growth forecast of around 5% p.a. over 2015 -2017, rising to 1.0 percentage point per year over 2018-2020 .
Comment
The UAE economy in general and the economies of the two main emirates grew at a relatively good pace in 2013 ( , but some clouds still linger on the UAE’s economic horizon. A sharp increase in real estate prices in 2013 (35% yoy) has raised fears of yet another property bubble, fears that have not yet dissipated.. More generally, the uncertain global economic environment continues to pose a risk to the overall positive economic outlook as the UAE’s economy is closely intertwined with the world economy.
A flourishing UAE economy is good news, especially when the UK is so strong in the main growth sectors in the UAE and with the UAE being our 6th largest trading partner in terms of goods imports.
0.2 Disclaimer
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