UAE growth forecast to touch 4% in 2013

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The UAE economy is forecast to grow by nearly four percent in 2013.

The UAE economy is forecast to grow by nearly four percent in 2013.

The UAE economy is forecast to growth by nearly four percent in 2013, according to a new report by KFH-Research.

Analysts said industrial production in the country will "improve gradually", and the non-oil sector will "be more significant".

KFH-Research added that tourism will prosper and UAE leaders will continue to encourage foreign investments.

The report also predicted that the UAE's construction sector, which has been in the doldrums for the past two years following the collapse of the real estate market, will return to growth in 2013.

It said Abu Dhabi, and to a lesser extent Dubai and the northern emirates, will increase spending on tourism and other infrastructure projects.

"We forecast moderate economic growth for the UAE, at three percent in 2012, conservatively lower than the Central Bank's forecast that growth may be exceeding 3.5 percent," KFH-Research said.

"Growth is, however, expected to be higher in 2013 at 3.9 percent on expectation of accelerating domestic recovery and gradual improvement in global economy," it added.

The report said the UAE's services sector will register "solid growth" while tourism is likely to continue to benefit considerably from the regional unrest in the early part of the forecast period.

"The expansion in the country's airlines - through the purchase of new aircraft as well as partnerships with other international airlines - will also boost tourism," the report said.

The UAE's non-oil sector is forecast to become increasingly important, especially in the latter half of the forecast period when major industrial projects come on stream, KFH-Research said.

Large projects include the $20bn Al Gharbia Chemicals Industrial City, which is due for completion in 2015, and the $4.5bn expansion of Emirates Aluminium (EMAL), which will boost annual aluminium capacity by the end of 2014.

The report said it expects the UAE's non-oil GDP to grow at 3.5 percent in 2012, up from 2.7 percent in 2011.

"These will account for robust growth in the manufacturing sector. Construction and utilities will also grow rapidly, at an annual average of 12.7 percent a year in 2012 onwards, as emirate-level governments increase capacity to meet the projected increase in electricity consumption," the report added.

KFH-Research said that while the likelihood of further major discoveries in the UAE is low, leaders hope to increase crude oil production to 3.5m barrels per day by 2018.

Last year, the country pumped around 3.1m bpd, the highest crude production levels since it began exporting oil five decades ago.

KFH-Research warned that downside risks remain and the euro and US economic crisis "could have major financial repercussions for the UAE and the GCC region".

A worsening of the euro debt crisis could impact the GCC through trade and financial linkages, it said.

Increased global risk aversion is adding to financing costs and limiting the availability of credit, particularly in the GCC due to geopolitical tensions in the neighbouring countries, it added.

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