With a nascent recovery in the property market and higher government spending spurring economic growth, investment is expected to increase in Abu Dhabi next year, analysts said.
The Abu Dhabi Government forecasts growth will accelerate to 5.7 per cent a year through to 2016. The pickup from an estimated 3.9 per cent this year will be led by government investment in metals, chemicals and the arts, including branches of the Guggenheim and Louvre, and is set to exceed expansion in Saudi Arabia and Qatar of 3.9 per cent and 5 per cent, respectively, Bloomberg reported yesterday. "We expect [Abu Dhabi's] real GDP growth in 2012 to be around 5 per cent, premised on 6.4 per cent growth in oil output, together with a 4 per cent growth in non-oil sectors," Standard and Poor's said last month.
UAE stock markets are set to benefit from an uptick in fund flows.
"The UAE markets I can tell you next year, will be the best performing GCC market," said Nabil Farhat, a partner at Al Fajer Securities in Abu Dhabi. "You have the improvement in the real-estate market, which has seen stabilisation and even some upward movement. That will attract capital from outside and the liquidity we all are looking for."
Fund managers are bullish that a recovery in the banking sector will help to bring investor interest back to the market.
"The banking sector is doing well, growth reached 17 per cent, even when we look at non-performing loans, our ratios were much better than Saudi Arabia's," said Wadah Al Taha, the chief investment officer at Al Zarooni Group, an investment company in Dubai. On Wednesday, the Central Bank reported that provisions for bad loans fell in October for the first time since 2008.
That compares with an advance of 15 per cent for the MSCI Emerging Markets Index.
A Dh44.56 billion (US$12.13bn) UAE federal budget is expected to be finalised soon, of which 39 per cent will go to social services, 22 per cent to security and 2 per cent to infrastructure and building.
This is a 7.6 per cent increase on last year and is part of a three-year spending plan of Dh133bn.
The federal budget accounts for only about 11 per cent of overall fiscal spending in the Emirates, with Abu Dhabi also setting its own budget for the next 12 months.
"New developments in the logistics sector, alongside an increase in non-oil trade, are expected to keep Abu Dhabi's economy on track for moderate expansion in the coming year, with plans for further diversification set to deliver increasingly balanced growth," the Oxford Business Group said in its Abu Dhabi: Year in Review 2012 report.
Meanwhile, next year could also see increased investment in Saudi Arabia as equity valuations remain at historic lows amid hopes for increased spending that could be announced in the Saudi budget for next year, analysts said.