By Andy Sambidge
HSBC Trade Confidence Index scores UAE at highest mark following successful bid for Expo 2020
The UAE is leading the world in a global index measuring trade prospects following its successful bid to host the World Expo in 2020, according to HSBC.
The bank's Trade Confidence Index (TCI) ranked the UAE ahead of all other countries covered with a score of 141, where 100 denotes a neutral reading.
The score was nine points higher than six months ago and the UAE's highest mark since the TCI was established in 2009.
"The UAE’s non oil economy is expected to drive the majority of growth in the next year as oil related growth slows amid already high oil production levels," HSBC said in a report.
"Dubai’s successful bid to host the World Expo in 2020 will give a further boost to key non oil sectors, which are already benefiting from an accelerating domestic recovery and improving global trade conditions."
It added that the short-term outlook for trade in the UAE was "very upbeat", with the reading for HSBC’s trade confidence indicator in the second half of 2013 at an all-time high.
HSBC said technology has been identified as a key sector for investment by the Emirati government as part of its diversification and development strategy.
"Because of the UAE’s success in diversifying away from oil and into other high value-added sectors, as well as its increasing orientation toward faster growing Emerging Markets, we are optimistic about its long term trade prospects," the report said.
Trade conditions are expected to improve in 2014 as growth in some of the UAE’s main export markets picks up, it added.
It said that UAE firms are upbeat about the short term outlook for trade volumes with 83 percent of respondents saying trade volumes would increase over the next six months, and 49 percent of the total expecting a significant rather than slight pick up in trading volumes.
With the shale revolution in America weighing on extra oil demand potential for the UAE in the medium term, non-oil sectors are expected to become more important drivers of growth.
However, global trends in oil demand and supply will continue to be crucial determinants to the UAE’s trade position, as petroleum products are expected to remain the country’s top merchandise exports by 2030, HSBC added.
In the upcoming years to 2030, HSBC said the fastest-growing trade routes for the UAE will be concentrated in emerging Asia and include the likes of India, China and Malaysia
The growth rates of export routes to the developed world will slow, the report said, but Japan, Australia and the US will still be important export destinations in level terms. Turkey and Saudi Arabia will also become increasingly important sources of demand.