Dubai: Merrill Lynch on Tuesday put its 2013 GDP growth forecast for UAE at a stable 3.2 per cent, citing a steadily recovering domestic economy and a better year for emerging markets.
Although the forecast is in line with the modest global growth rate of 3.2 per cent, it warned of risks, including a tough first half for the Eurozone.
“Locally, [there’s] a fair amount of stability post the crisis,” said Johannes Jooste, head of strategy, chief investment office at Merrill Lynch Wealth Management, Europe, Middle East and Africa during a press conference in Dubai. “Certainly my impression is that the property market is stabilising.” He also cited tourism and trade sectors as positives for the local economy.
Looking at the global trend, Jooste said US is “certainly picking up”.
“Our expectation is, elsewhere in the world, with the possible exception of Europe, asset values are stabilising. So, [there’s] nothing distinctly different in this region compared to globally,” he added.
Property in Dubai, particularly in specific neighbourhoods and segments, has shown good signs of recovery, according to recent reports citing global consultancies and property agents. Project handovers, off-plan sales of Emaar and Nakheel projects and the highly publicised Mohammed Bin Rashid City point to the confidence returning to the real estate sector.
On the global positive side, Jooste said, the emerging market growth is “looking good.”
In his presentation, he particularly cited 2013 to be a better year for China’s economy as it slowly transitions towards a more towards domestic consumption economy.
Merrill Lynch believes the case for equities is starting to dominate and, in terms of global asset allocation for 2013, it is overweight on emerging markets, including the GCC (Gulf Cooperation Council) countries.
However, globally, when it comes to majority of fixed income profiles for balanced portfolios, the idea is to have “as little as possible” of government bonds, he said. The bank is hugely underweight on cash too.
With regard to the global negative factor impacting growth he cited the deleveraging still faced by the banking sector, specifically the European ones.
“I think the deleveraging has a greater impact on funding and investment rather than trade. So it has slightly longer-term impact,” Jooste said.
He also cited political risk growing in importance for emerging economies.
“I would suggest that any region that has gone through upheaval or change in the last year or two years, you have got to keep in mind that you can do things or produce results that are outside of the expectations, whether positive or negative,” Jooste said. “It works more as a risk factor in your thinking rather than something directional.”
The final figure for 2012 UAE growth, according to Merrill Lynch, is expected to be 3.3 per cent. Jooste does not believe the difference between this year’s forecast and next year’s to be statiscally significant.
Box: On last month’s announcement of Mohammed Bin Rashid City, which would include the world’s biggest mall and 100 hotels, among other features, Johannes Jooste, head of strategy at Merrill Lynch Wealth Management, Europe, Middle east and Africa, believes that while it is a “vote of confidence in the region”.
On the question on where would the funding of such a mega project come from, Jooste said “If there is sufficient demand from a specific sector and the bonds are sufficiently aggressively priced at the right yield, the funding will be there.”
“But that’s no different in this region than anywhere else,” said Jooste, who acknowledged that he had not studied the details of the project.