x Abu Dhabi, UAESaturday 22 July 2017

Abu Dhabi index puts economy in focus

A new business cycle indicator shows Abu Dhabi's economy dipped in the first quarter of the year.

The new business cycle indicator will provide an early snapshot of Abu Dhabi's economy. Anwar Mirza / Reuters
The new business cycle indicator will provide an early snapshot of Abu Dhabi's economy. Anwar Mirza / Reuters

Abu Dhabi's economic performance dipped in the first quarter of the year, the results of a newly launched business cycle indicator in the capital show.

Weakening business and household sentiment helped draw to the indicator down compared with the same period last year, according to the new index from the Abu Dhabi Department of Economic Development (DED).

"The recovery will be longer and more difficult than expected and restoring confidence is more important than ever," said Rashed al Zaabi, the deputy executive director of the planning and statistics sector at the DED.

Officials say the DED's Abu Dhabi Business Cycle Indicator will provide the most accurate and timely gauge of the health of the emirate's economy.

Published every quarter, the index is a composite of five individual indicators: the number of new business registrations from the Abu Dhabi Chamber of Commerce and Industry; firms' assessments of the current business situation; data on personal income; the performance of stocks on the Abu Dhabi Securities Exchange; and oil prices.

Much of the data is already published separately but is being combined for the first time.

The DED has partnered the German International Co-operation, a German government policy agency, and the University of Munich's Institute for Economic Research (IFO) to launch the indicator. They gathered data from as far back as 2002 with the German experts helping to analyse the results.

Officials hope the indicator will enable the Government to improve policymaking as well as helping the private sector to plan ahead.

"This is considered a quantitative leap for the economic department and will serve in helping the emirate in achieving its 2030 vision," said Mr al Zaabi.

Most economies in the developed world already have similar business indicators in place.

Known as coincident indicators, they allow analysts to assess the state of the economy soon after the end of a financial quarter. GDP and other data is sometimes not released as quickly.

Abu Dhabi's indicator will also help to plug a gap in the availability of up-to-date statistical data long bemoaned by economists.

"Coincidental indicators are not a replacement of GDP data but an addition of very timely information," said Klaus Abberger, a scientific co-ordinator at IFO. "They provide an indication of the health of the economy, where are its strengths and where are its weaknesses."

The results of the latest indicator suggest the emirate's recovery from the global financial crisis has been patchy.

Abu Dhabi's economy is forecast to expand by 3.7 per cent this year, up from 3.5 per cent last year, according to the Institute of International Finance, a global association of financial institutions.

On the plus side, higher oil prices have helped to raise revenues from crude exports and inflationary pressures also remain moderate.

But business outlook and households' assessments of their current income situation weakened in the first quarter after an improvement at the end of last year. The emirate's stock market is still below its performance level of the pre-financial crisis era.

"I think it's clear that the economy in Abu Dhabi is in a somewhat fragile state," said Gernot Nerb, the head of industry branch research at IFO. "With an overhang in the real estate sector it takes time to gain speed again."

tarnold@thenational.ae