Growth in UAE economy to outshine those of other Gulf countries – Thanks to the non-oil sector
Comfortable fiscal position supports greater government spending
Dubai: The UAE’s economic growth in 2019 is projected to top overall growth across the Gulf Cooperation Council (GCC) region, largely driven by non-oil growth supported by pick up in government spending, according to latest forecasts from the Institute of International Finance (IIF).
“We expect growth to pick up from 2.9 percent in 2018 to 3.2 percent in 2018, supported by the stimulus package of $13.6 billion [Dh49.9 billion] (3.1 percent of GDP) introduced in June 2018 for a period of three years,” said Garbis Iradian, chief economist of IIF Middle East and North Africa (Mena) .
While the UAE’s Purchasing Managers’ Index (PMI) has increased in recent months, and year-on-year growth in deposits and credit is accelerated to 8.2 percent and 4.7 percent, respectively, in January 2019, the highest among GCC countries.
“We expect growth to pick up from 2.9 percent in 2018 to 3.2 percent in 2018, supported by the stimulus package of $13.6 billion [Dh49.9 billion] (3.1 percent of GDP) introduced in June 2018”
– Garbis Iradian | Chief economist of IIF Middle East and North Africa (Mena)
Continuing decline in residential prices both in Dubai and Abu Dhabi are seen as a risk to both non-oil growth and banking sector asset quality.
“Rents have fallen by about 20 percent in the past three years, and we expect the declines to continue in 2019, albeit at a slower pace, as job growth remains low and new housing becomes available,” said Iradian.
With relatively high concentration of loans (about Dh300 billion) to the real estate sector in the UAE, that accounts for approximately 20 per cent of total loans and about Dh100 billion worth of mortgages (about 7 per cent of total loans), further decline in real estate prices are expected to have asset quality and credit quality implications for the banking sector.
Credits: Gulf News