KHALEEJ TIMES, Tuesday, Jun 11, 2019 | Shawwal 8, 1440
UAE stays on growth path
Growth forecast for the UAE and most of the Gulf economies has been
revised down for 2019 and 2020 due to cuts in oil production. The growth for the
wider Mena region is projected to remain subdued.
According to the World Bank's latest report, the UAE's growth was cut by 0.4 per
cent and 0.2 per cent to 2.6 per cent for 2019 and 3 per cent for the next year,
respectively, from its January 2019 forecast. While growth rate for 2021 was
maintained at 3.2 per cent.
However, the 2019 forecast by the World Bank is higher than the UAE Central
Bank's forecast of 2 per cent, which it predicted in its 2018 annual report
released last month.
FocusEconomics expects the UAE's GDP to grow 2.6 per cent in 2019 and 3.1 per
cent in 2020.
"Growth should ramp up this year, supported by a large fiscal stimulus focused
on infrastructure investment for Expo 2020, as well as by a swathe of
business-friendly reforms to attract foreign investment. Nevertheless, the
evolution of Opec+ output decisions will be key to the outlook, while lower
global growth and a fragile real estate sector pose additional risks,"
FocusEconomics said in the note.
The World Bank noted that the UAE's reform of financing liberalisation for the
small and medium enterprises will help relieve constraints in the corporate
sector and support investor confidence.
Shan Saeed, chief economist, IQI Global, is cautiously optimistic about the
growth outlook of the UAE and Gulf region.
"GDP growth should meander around 2.5 to 3 per cent in the coming 12-18 months.
The economy will have structured growth taking into account the global
headwinds. Recently, the UAE has made a strategic move and become an important
player in the Belt and Road equation. This would bolster the relevance and
significance of the UAE as a major hub of economic and infrastructure
development," said Saeed.
He pointed out that the UAE continues to be on the global investors' radar due
to business-friendly policies of the government, connectivity to three
continents in less than 7 hours and above all highly-skilled labour force talent
The factors that would contribute significantly to the overall GDP growth are
massive FDI inflow, modern infrastructure, higher energy prices, liberal visa
policies and an important player in the Belt and Road equation, he added.
The World Bank in its Global Economic Prospects 2019 report said that an
improved regulatory and business environment in the GCC would remain supportive
of private sector activity.
The overall GCC growth forecast for 2019 was slashed by half a per cent to 2.1
per cent for 2019 but revised upward for the next year by half a per cent again
to 3.2 per cent. While 2021 forecast remains unchanged at 2.7 per cent for the
"Growth in the Middle East and North Africa is projected to remain subdued in
2019, at 1.3 per cent. Activity in oil exporters has slowed due to weak oil
sector output and the effects of intensified US sanctions on Iran, despite an
easing of fiscal stance and positive prospects in non-oil sectors in some
countries. Many oil importers continue to benefit from business climate reforms
and resilient tourism activity. Regional growth is projected to pick up to
around three percent a year in 2020-21, supported by capital investment and
policy reforms," said Lei Sandy Ye, economist, Word Bank.
He warned that risks to the outlook are tilted to the downside for Mena region,
including geopolitical tensions, reform setbacks, and a further escalation of
global trade tensions.
However, GCC growth in non-oil sector is picking up amidst easier fiscal stances
and higher government spending.
FocusEconomics said growth prospects for the Middle East and North Africa are
deteriorating on the back of elevated geopolitical risks, weak global demand and
severe oil production cuts. Moreover, escalating trade tensions between China
and the US threaten to hit global economic growth, which could, in turn, reduce
demand for the black gold.
The Mena economy is projected to expand 1.6 per cent in 2019, down 0.2
percentage points from last month's forecast. For 2020, the Mena economy is
projected to expand 2.8 per cent, said FocusEconomics.
According to World Bank report, growth in oil importers is expected to rise
steadily from 3.9 per cent in 2018 to 4.7 per cent in 2021, led by expansions in
the larger economies. These projections are predicated on business climate
reforms to support investment, healthy tourism activity, and a slight easing in
Growth prospects in smaller oil importers such as Jordan, Lebanon, West Bank and
Gaza are highly uncertain, however, as business and consumer confidence are
contingent on anticipated reforms or foreign financial assistance.
World Bank report noted that inflation is contained in most of the Mena region,
with rates averaging less than three per cent in the past year in the GCC
countries and falling recently to about 3 percent in the smaller oil importers.
Policy interest rates in these economies have mostly remained neutral.