By Staff writer
New report says fiscal drag to ease and infrastructure activity to increase as UAE recovers from slowdown
Real GDP growth in the UAE's non-oil economy has bottomed out as the fiscal drag eases and infrastructure activity picks up, according to a new research note from Bank of America Merrill Lynch.
Its MENA economist Jean-Michel Saliba believes the UAE has managed a "soft landing" with a less pronounced cycle that in 2008 amid harsher impacts elsewhere in the Gulf region.
Saliba said that while overall UAE real GDP growth of 0.9 percent is expected in 2017, down from the 2.2 percent likely in 2016, the non-oil economy is rebounding.
The headline figure masks a likely contraction in the oil sector due to the OPEC deal, but non-hydrocarbon real GDP growth is set to pick up to 2.7 percent in 2017, from 2.3 percent in 2016.
Saliba said that over the medium term, non-oil growth is expected to increase to 3-3.5 percent on the back of greater Expo 2020 projects.
The research note said Dubai remains committed to fiscal prudence but deficits are likely to widen modestly.
It said the Dubai government is likely to have recorded a small budget surplus in 2016 which is likely to shift to modest deficits (1-2 percent GDP) from 2017 onward as capex associated with the new airport, new metro lines and Expo 2020 come on line.
Saliba said Abu Dhabi appears on track to record fiscal surpluses while the approaching completion of major infrastructure projects should help keep a lid on capex spending as it peaks over 2017-18.