The Kuwait Financial Centre projected an $800m deficit for the UAE in the coming year, with an eight percent decline in revenues.
It also said it expected the UAE’s corporate earnings to grow by 24 percent 2011 after declining by an estimated six percent in 2010.
It segregated the projections for Abu Dhabi, which are positive, and Dubai, which remain neutral.
“Abu Dhabi is expected to decrease its contribution to the federal budget by 19 percent to $3.16bn in an effort towards balancing its own budget,” the KFC’s report said. “Dubai’s contribution to the federal budget is expected to remain at about $330mn in 2011.”
It said the UAE’s economy fell short of its 3 percent real GDP growth for 2010 and managed an estimated growth of about 2.4 percent.
The latter number is expected to increase to 3.2% in 2011.
Inflation was at 2 percent in 2010 and is expected to bump up to between 2.5% - 2.8% in 2011 as economic growth picks up. UAE non-oil foreign trade up, oil and Asia to lift 2011
“Additionally, the geopolitical and regulatory arenas are considered to be stable,” it said. “However, lack of liquidity remains a problem as value traded in the UAE continues to dry up.”
Debt issues will continue to plague the UAE, even as the GCC pulls itself out of economic turmoil.
They “will continue to be a drag on economic growth as banks provision against possible losses and remain wary of funding new projects,” the report said. “Dubai has over $42bn in debt obligations due in 2011 and 2012 and an additional $55bn beyond that.
It said the support of Dubai by economically sound AD will be closely watched.
“A further drag on aggregate earnings in 2010 would come from the telecom sector, which is expected to show a decline of 16 percent in earnings for 2010. In 2011, we expect Banks to show a growth of 32 percent with a moderate return to growth in real estate and construction,” KFC said.
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