Dubai: The UAE's economic growth is projected to remain resilient in the face of global economic upheavals and regional political turmoil, the Institute of International Finance (IIF) said in a report yesterday.
"We expect growth to accelerate in 2011 on the back of rising oil production. Most indicators of economic activity have registered a significant rise in real terms in the first three quarters of this year. We have projected a slight slowdown in growth in 2012 because of the potential impact of lower oil prices," said George T.Abed, senior counsellor and director of the IIF's Africa Middle East Department.
The IIF has forecast GDP growth of 4.4 per cent and 3.1 per cent for 2011 and 2012, respectively.
In Abu Dhabi, non-hydrocarbon growth is expected to be supported by high public spending on infrastructure, including spending through government-related entities (GREs).
The solid growth in Dubai's core activities of trade, retail sales and tourism will more than offset the continued retrenchment in the construction and real estate sectors, resulting in growth of 3 per cent.
According to official statistics, the share of construction and the real estate sector in Dubai's GDP declined from 30 per cent in 2007 to 23 per cent in 2010.
Commenting on the debt position of Dubai, the IIF official said the debt obligations falling due in 2011 and 2012 remain high at 14.5 per cent and 13.4 per cent of Dubai's GDP, respectively.
"Backed by UAE federal resources and having successfully restructured a large portion of its debt, Dubai's financial position has improved markedly. Capital markets are encouraged by the emirate's efforts to improve governance, reform real estate finance, sell assets, and remain current on interest payments," said Garbis Iraidan, deputy director of IIF's Africa Middle East Department.
In June 2011, Dubai returned to capital markets, launching a $500 million (Dh183.6 million) 10-year bond priced at 5.6 per cent.
The IIF officials said the country has one of the strongest fiscal positions in the region.
"We project total gross foreign assets of the UAE to continue rising to about $600 million by end-2012. This would result in an overall net external asset position of about $480 billion, equivalent to 130 per cent of 2012 projected GDP," Abed said.
Such large financial resources will be more than adequate to finance likely fiscal deficits for several years if oil prices fall below $85 a barrel, which is the estimated breakeven price of oil that balances the consolidated 2011 budget for the UAE.
Strong footing
- 3.1%: IIF's projected GDP growth this year
- 4.4%: IIF's projected GDP growth next year
- 23%: share of constructionin Dubai's real estate
