By Parag Deulgaonkar
Fitch subsidiary expects billions in new projects to begin construction
Economic growth in the UAE will pick up significantly this year and in 2018, driven mainly by growth in the non-oil sector and higher crude oil prices, according to a new report.
On a regional level, the UAE will be one of the outperformers among the Middle East’s oil exporters, given its diversified economy, huge financial reserves and enormous infrastructure plans, BMI Research, a Fitch Group company, said on Thursday.
“We believe government cutbacks in spending have largely passed and are particularly optimist on the construction sector. We forecast real GDP growth of 2.8 percent in 2017 and 3.3 percent in 2016, a notable uptick on an estimated 2.2 percent growth in 2016,” it said.
Oil prices are expected to average $57 per barrel this year and $60 a barrel next year, the report said.
Another boost for the UAE economy will come from the construction sector as preparations gain speed for the World Expo 2020 in Dubai with BMI expecting new projects to be launched and construction at ongoing or stalled projects to be expedited.
“We expect around $6.9 billion (AED24.22bn) to be earmarked for projects around the [Expo] event. The Expo will also boost the UAE's tourism sector and ensure continued double-digit growth rates,” the consultancy said.
According to BMI’s key projects database, projects worth $154bn (AED565.18bn) are likely to begin construction which is on par with the estimated $180bn projects currently under construction.
Despite lower oil revenues, BMI said it expects the UAE's model of government-driven development plans to continue.
The federal government has made fiscal consolidation a priority over the past two years, which have slightly mitigated the impact of lower oil prices. In addition, reductions in fuel subsidies and the introduction of a value added tax in 2018 will bode well for further improvements on the fiscal front.
“While the government will fall into a sustained fiscal deficit, the UAE has the financial arsenal and the political necessity to continue spending in part indicated by the elevated levels of foreign reserves,” the consultancy said.
Last month, the Institute of International Finance, a global association of financial institutions, said confidence is gradually returning in the UAE economy as non-oil activity is picking up with consumption spending expected to rise in the second half of 2017.
Just somebody's viewpoint (and probably also paid to study and make an analyis by whom?).
Does not at all reflect the situation in reality 'on the ground' today or tomorrow.