Dubai: The UAE is best equipped to cope with potentially prolonged weakness in oil prices given its diversified economy and solid buffers, Barclays said in a report on Wednesday.
“We think the UAE stands out among its GCC peers as the best equipped to cope with potentially prolonged weakness in oil prices given its diversified economy and solid buffers,” said Alia Moubayed an analyst with Barclays.
Among the GCC countries, Moubayed said the UAE is the most capable of adapting to the structural changes in the global oil markets.
Ongoing official efforts to diversify the UAE’s economic structure and encourage the expansion of the non-hydrocarbon sectors have seen the share of the non-hydrocarbon sector increase from 44.7 per cent of GDP in 2000 to 61.1 per cent of GDP in 2013.
“Diversification efforts have also contributed to containing the role of the public sector in driving non-oil GDP growth. After rising sharply in 2009 to 30.6 per cent of non-oil GDP, the share of public-sector consumption and investment in total non-oil GDP fell back to 25.3 per cent by 2013,” said Moubayed.
The reduced reliance on oil revenues is reflected in the increasing share of non-hydrocarbon in the UAE’s exports and fiscal revenues. This is partly explained by the growing share of investment income earned on net foreign assets, as well as the rapid expansion in non-oil exports of goods and services (notably from Dubai).
According to Barclays Dubai’s economic recovery is unlikely to be dented by lower oil prices. “While preparations for the Expo 2020 are ongoing, we expect GDP growth to reach about 5.7 year on year in 2014 and 2015 and accelerate only thereafter. We expect the Dubai government to continue its fiscal consolidation,” said Moubayed.
