Dubai: The UAE economy enjoyed a robust growth of 4.6 per cent last year and is expected grow at the similar rate in 2014 according to the latest forecast by Emirates NBD’s economic research section.
“Looking ahead, we expect growth at a similar pace [like last year] this year. The oil sector is unlikely to contribute significantly to the UAE’s growth in 2014, as substantial increases to crude output in 2011-2013 are now in the base, and supply from Iran, Iraq and Libya is expected to rise this year. We have assumed the UAE’s oil production will increase by around 2 per cent this year,” said Khatija Haque, Head of Mena Research at Emirates NBD.
In 2013 oil production increased and the domestic and regional economic recovery boosted the non-oil sectors of the economy. The UAE’s oil production rose by an estimated 4.7 per cent in 2013, well above most forecasts at the start of the year. The non-oil sector has also enjoyed strong expansion, particularly in Dubai where data shows that manufacturing, hospitality and trade grew robustly in the first half of last year.
Going forward analysts and economists expect UAE’s economic growth to be supported by the non-oil sectors.
“We expect growth to come largely from the non-oil sectors, which are likely to benefit from an improving global growth environment as well as strong domestic and regional fundamentals. These include supportive fiscal policy in the rest of the GCC, which will continue to spillover into the UAE through trade and tourism; as well as increased consumer and investor confidence in the UAE’s medium and long-term growth prospects,” said Jean Paul Pigat, Middle East and North Africa (Mena) Economist at Emirates NBD.
Credit rating agency Moody’s which recently affirmed the country’s foreign and local-currency government issuer ratings at Aa2 with a stable outlook expects non-oil sector to be the key driver of the economy in the year ahead.
“We expect the UAE’s real non-hydrocarbon growth to average 4.8 per cent in 2013-15 on the back of a renewed investment drive; accelerated population growth; dynamic demand from GCC neighbours; and a stable domestic political environment,” said Thomas J. Byrne Senior Vice President — Manager at Moody’s.
The non-oil sector of the UAE has developed rapidly and has overtaken the oil sector as the main contributor to real GDP growth in the past decade. The UAE’s openness and ease of doing business has helped this development. The UAE ranks 19th out of 148 countries in the World Economic Forum’s Competitiveness Index, making it the second most competitive country in the Middle East region after Qatar.
Growth in the non-oil sector has limited the UAE’s dependency on oil to a greater degree than Qatar and Kuwait. The UAE’s non-oil sectors include wholesale and retail trade (11 per cent of GDP), manufacturing, real estate and construction (9 per cent of GDP each) and transport, storage and communication (8per cent of GDP).