Dubai: The UAE’s trade will benefit this year from rising oil prices, improved macroeconomic outlook for country’s key trading partners, and increased government spending, according to an HSBC research.
The HSBC survey, released on Wednesday, shows that 77 per cent of the UAE’s businesses project an increase in trade volumes in the next 12 months, while almost three quarters (62 per cent) expect to see a jump in service trade volumes. Dubai’s economy is expected to enjoy a strong year, as the government boosts investment ahead of Expo 2020 and the stream of incoming tourists swells.
“Although oil prices have impacted the GCC’s economies over the last year, the UAE’s push for diversification is bearing fruit. As we get closer to Expo 2020, we will see an increasing number of contracts being awarded in preparation, which in turn, increases opportunities for businesses,” said Sunil Veetil, Regional Head of Global Trade and Receivables Finance for HSBC Menat (Middle East, North Africa and Turkey).
Industry data shows infrastructure projects worth $2 trillion across the GCC, while in the UAE, $2.9 billion worth of contracts were awarded in 2017 for Expo 2020 alone.
The transportation and tourism sectors accounted for an estimated 97 per cent of the UAE’s total service exports in 2017 and is projected to grow 6 per cent per year. Higher projected tourism flows this year is expected to support growth in these sectors. Recent data show healthy growth in passenger traffic, with Dubai’s international airport recording a 5.5 per cent year-over-year increase in 2017.
The study showed more than a third (35 per cent) of respondents in the UAE view entry into new markets as an important strategy for growing their services business; businesses are also embracing new technology, with almost a quarter of respondents (24 per cent) identifying this as a key enabler of growth in their service business. Building on this theme, almost three quarters of businesses (72 per cent) think that easier access to data creates a level field for trade. However, a clear majority of respondents (70 per cent) were concerned about cyber security threats.
As the UAE depends so heavily on trade, the potential rise of global protectionism puts is likely to impact its economic outlook. But in the near term, businesses seem more concerned about regional politics — although they disagree on the impact. More than 40 per cent of firms think the political environment in the Middle East will be beneficial to their business over the next two years; conversely, just over a third (34 per cent) of them say it will be detrimental.
Asia’s markets will remain the principal buyers of the UAE’s goods exports (and re-exports), given their booming populations, strong economic growth, and increasing energy needs. India, China, and Japan will retain the top three spots on the export destinations. By value, merchandise exports to India and China will grow on average 10 per cent and 9 per cent per year respectively, between 2021 and 2030.
The UAE’s exports to other Mena countries will also grow rapidly, thanks to closer bilateral economic and political ties. Merchandise exports to Saudi Arabia and Egypt should grow by an average of 7 per a year between 2021 and 2030 in value terms.
Overall, the HSBC forecast that the Asian economies (excluding Japan) will capture almost two-thirds of the UAE’s total merchandise exports by 2030, while the Mena region will account for close to a fifth.
Today, the UAE’s top five import partners consist of three advanced economies (the US, the UK and Germany) and two emerging economies (China and India). By 2030, Saudi Arabia is expected to leapfrog both Germany and the UK to become the UAE’s fourth largest supplier of merchandise imports.