Dubai: The Middle East is well placed to diversify its economy away from oil and gas, with growth potential in numerous sectors, according to a new report by Swiss global wealth manager UBS.
UBS’s Chief Investment Office sees opportunities in solar power, tourism, and finance, and points to economies such as Saudi Arabia and Iran, which are opening up to greater foreign investment.
In some economies, greater diversification could lead to an eventual relaxation of exchange rate pegs with the US dollar, boosting their long-term flexibility, the firm said in a statement.
Juerg Zeltner, President of UBS Wealth Management, said, “The Middle East’s position in the world continues to evolve. The necessary reforms will not be easy, and the years ahead not without difficulties. Yet the professionalism, humility, and realism of the clients and investors I have met in the region give me tremendous confidence in its ability to shape its future.”
Jorge Mariscal, Emerging Markets Chief Investment Officer at UBS Wealth Management, added “The Middle East surpasses the global average in development indicators such as education, telecoms penetration, and income equality. The region is ripe for policies that will support employment and put it on a more sustainable economic footing.”
UBS said fuel subsidies are increasingly untenable amid growing domestic demand for power, and solar could help fill the gap. The firm pointed to a Middle Eastern Solar Industry Association estimate that large-scale solar installations would be competitive even if oil dropped to $30 a barrel and gas to $5 per million British Thermal Units.
In the tourism sector, UBS said the UAE, particularly Dubai, had led the way, but other countries were following suit, notably Qatar and Saudi Arabia. Challenges included cultural differences between residents and visitors, and perceived security threats.
In the finance sector, UBS pointed to rising bond issuance, and said a trend to privatisation and greater foreign ownership would help open up the region’s equity markets.
