Expo 2020, economic reforms, Abu Dhabi's $13.6 billion stimulus, and ADNOC's expansion could add about 1 percent to the UAE's non-oil real GDP growth in 2019, according to new research.
Bank of America Merrill Lynch said structural reforms support potential growth through higher human capital, population, real estate demand and competitiveness.
Its MENA economist, Jean Michel Saliba, said that UAE non-hydrocarbon economic activity is likely to turn the corner in 2019.
"We estimate Expo 2020 projects, the boost to corporate profits from the revised worker insurance scheme, the Abu Dhabi fiscal stimulus and ADNOC downstream expansion plans could add about 1 percent to UAE real non-hydrocarbon real GDP growth next year.
"Still, reform details and implementation timeline need to be further fleshed out. Over the medium term, we expect UAE non-hydrocarbon real GDP growth to increase to about 3.5 percent, from 2.8 percent in 2018 and 1.9 percent in 2017," he added.
Bank of America Merrill Lynch's research note also forecast that the Dubai and Abu Dhabi sovereigns are unlikely to issue international debt this year.
It noted that overall UAE real GDP growth is set to rise to 1.9 percent in 2018, from 0.5 percent in 2017, adding that the headline figure masks a likely stabilisation in hydrocarbon real GDP following a contraction in the oil sector in 2017 due to the OPEC deal.
The research also said that the recently announced foreign ownership law should boost foreign direct investment prospects from a low base, as FDI stood at just $10.3 billion (2.7 percent of GDP) in 2017, but the scope of deregulation is critical.
UAE authorities introduced a landmark law that will allow, by year-end, foreign investors to own 100 percent of companies in the UAE in specific industries deemed essential, up from 49 percent previously.
Decision on sector inclusion will likely be based on factors such as potential for job creation and technology transfer, and will likely exclude sensitive sectors such as defence.
Currently, foreigners are able to fully own a company in designated free zones.
"The appeal of free zones could thus be diminished somewhat, although we note that such zones also benefit from tax, law and regulatory advantages," added Saliba.
He also said the new UAE long-term and temporary visa system should facilitate retention of white-collar expatriates, and may increase expatriate incentives to acquire property and support real estate demand.
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