Abu Dhabi: The drop in oil prices is not expected to affect the UAE’s Gross Domestic Product (GDP) in 2014, according to Mohammed Al Shehhi, undersecretary for economic affairs at the Ministry of Economy.
“The oil price impact doesn’t reflect highly in our GDP because it accounts for less than 30 per cent of GDP. The UAE economy is now very diversified,” Al Shehhi told reporters on Tuesday.
Brent crude oil hit a four-year low on Monday, reaching a price of $87.7 per barrel — down more than $25 from its peak in June.
Saleem Khokhar, head of equities at the National Bank of Abu Dhabi’s asset management group, said that GCC countries, including the UAE, already have significant oil reserves that are enough not to make the decrease in oil prices a problem for the economy.
“When you look at short-term movements, [the drop in prices] is not such a big deal. If you get a long-term sustained drop, and they remain at $80 for argument’s sake, then it will start to have an impact on the medium- to long-term but not immediately,” he told Gulf News.
Khokhar added, “What you have to remember is that the break-even oil price for us is around the $85 to $90 mark. Once you start to go below that, it’s not going to be an immediate effect; you have to have a sustained lower price. The other side of the equation is that there are plenty of foreign assets that are held overseas by many countries, and we’re talking hundreds of billions of dollars.”
He said he did not expect the UAE will need to use its foreign reserve on the short-term.
As for the outlook for oil prices, Khokhar said he expected them to stabilise at around the $90 level.
“You have to remember that the demand for oil is not decreasing; it is increasing overall, particularly from the Asian countries,” he said.
