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Higher spending may spur UAE non-oil sector growth

$10 billion of private sector funds to be injected into the GCC.

Shipping cranes, operated by DP World ltd inside Fujairah port. Dubai’s win for the right to host the World expo in 2020 is widely perceived to boost the sentiment of the UAE economy in the near term, while in the medium term, Dubai and the UAE would benefit from the huge infrastructure outlay earmarked for the event. — Bloomberg

The UAE is poised to emerge as a regional powerhouse in trade and tourism and as an investment destination on the back of ongoing diversification initiatives, Al Masah Capital, an alternative asset management company, said on Wednesday.

The UAE Government expenditure is scheduled to increase 4.5 per cent in 2014, which would further help sustain growth in the non-oil sector.

“Despite global economic uncertainty, the UAE’s strong financial position and sizeable reserve assets would lend support to the rapidly growing non-hydrocarbon sector,” Shailesh Dash, CEO of Al Masah said.

The International Monetary Fund, or IMF, estimates the UAE’s economy to have expanded at 4.1 per cent in 2013 and 3.9 per cent in 2014. “Much of this growth would be driven by increased investments, the country’s favourable demographic profile, stable political environment, and increased trade relations with neighboring GCC states. Hospitality, manufacturing, trade, and logistics would be the primary drivers of growth in the non-hydrocarbon sector during 2014,” Al Masah said in its Mena Yearbook 2013.

In its report, Al Masah noted that the Mena region continued to register large fiscal and current account surpluses. “The GCC region, in particular, fared well. Aided by considerable diversification of the economies to non-oil sectors, the GCC registered solid fiscal surpluses (the IMF projects GCC to post a fiscal surplus of 10.8 per cent of GDP in 2013) despite heavy public spending,” said the report.

In the GCC, Kuwait registered the largest fiscal surplus in 2013 in terms of percentage of GDP. The “GCC economies have collectively accumulated current account surpluses of about $342 billion (21.3 per cent of GDP) in 2013, a small decline compared to $385 billion registered in 2012. Among GCC nations, Kuwait also registered the largest current account surplus as a percentage of GDP, the report said.

“The economic growth achieved by the UAE in 2013 is commendable given that the GDP growth of 4.4 per cent registered in 2012 was largely fuelled by increased oil production and stronger services growth. Dubai’s real GDP growth was up 4.9 per cent in the first half of 2013 due to strong contributions from manufacturing, trade, transport and financial services sectors. Dubai’s real estate sector also exhibited an uptrend in 2013. For Abu Dhabi, it is believed that non-oil related trade has largely contributed to its GDP growth in 2013,” said the report.

Al Masah said Dubai’s win for the right to host the World Expo in 2020 is widely perceived to boost the sentiment of the UAE economy in the near term, while in the medium term, Dubai and the UAE would benefit from the huge infrastructure outlay earmarked for the event. An estimated $6.9 billion has been earmarked for the infrastructure projects around the event.

According to a report by Qatar National, the World Expo 2020 is set to add an estimated 4.5 percentage points to UAE’s GDP growth. The report also forecasts another $10 billion of private sector funds to be injected into the GCC economy in relation to this event.

— issacjohn@khaleejtimes.com