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High oil output and government spending leads to raised UAE GDP growth forecast of 4.7%

Institute of International Finance revises its initial forecast of 3.9% for 2013 after robust growth in the first three quarters.

The UAE’s economy is forecast to grow by 4.7 per cent this year, fuelled by higher than expected oil output and high government spending in Abu Dhabi, according to the Institute of International Finance (IIF).

The IIF announced yesterday that it had raised its forecast for the country’s GDP growth in 2013 to 4.7 per cent from its previous forecast of 3.9 per cent, on the back of higher than expected oil output during the first three quarters of this year.

The country’s nonhydrocarbon real GDP growth is forecast to accelerate from 4.1 per cent in 2012 to 4.6 per cent in 2013, driven by higher government capital spending in Abu Dhabi and continued robust growth in trade, tourism and transportation in Abu Dhabi and Dubai.

However the institute has reservations about the effect “the renewed cycle of risk-taking” may have on the economy in the medium term, according to Garbis Iradian, deputy director, Africa and the Middle East for the IIF.

Mr Itadian welcomed recent moves by the UAE Central Bank to limit banks’ exposure to real estate and government-related entities.

“Furthering structural reforms, strengthening federal institutions and GREs’ corporate governance, and improving risk management practices are also important to reinforce the UAE’s resilience to external shocks,” he said.

In its Regional Overview on Middle East and North Africa report released yesterday, the IIF forecast yesterday that the 16 countries of the region would register an overall GDP growth of 2.9 per cent in 2013, rising to 3.8 per cent next year.

But while the region’s 10 oil-exporting countries are forecast to grow by 3.2 per cent and 3.9 per cent in 2013 and 2014, the region’s non-oil exporting countries are forecast to grow by an average of just 1.8 per cent this year and 2.4 per cent next year.

The fiscal divide between oil exporters and importers is even starker. According to IIF forecasts, exporting countries are expected to achieve average surpluses of 6.3 per cent of GDP (rising to 10.8 per cent for the six countries of the GCC) while oil importers face deficits of 10.3 per cent in 2013 and 2014.

Economic prospects are particularly gloomy for countries in the region affected by the Arab Spring, said George Abed, senior counselor and director for Africa and the Middle East at the IIF.

“The popular uprisings against authoritarian rule and for human dignity have morphed into various forms of political, sectarian or armed conflicts, dimming the outlook for political stability and economic recovery,” he said.


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