HSBC believes the UAE will be virtually unaffected by the political turmoil in the region.
Bank says UAE will come through regional unrest intact
The UAE is one of only two states in the Mena region that will be virtually unaffected by the economic fallout from the political turmoil that has hit the area, according to HSBC.
In a report written by the bank's economic analysts in Dubai, HSBC says that, along with Qatar, "confidence in political stability and security remains undimmed" in the UAE.
The country could even benefit from the turmoil. "The problems being experienced elsewhere may offer the economy some support by strengthening its claim to be a safe haven and natural hub in a wealthy but volatile region," said the bank.
The report compares the current situation in the UAE with its prospects 18 months ago, when the "leverage of its state-owned corporates, the collapse of its real estate bubble and its integration into troubled global markets epitomised the vulnerabilities and excesses that the rest of the region was eager to avoid. Prospects have now changed.
"For all its debt woes and recent economic slump, the UAE's combination of vast hydrocarbon wealth and a dynamic export-oriented service sector has created an economy that has delivered growth and relative prosperity to its small local population."
HSBC said the UAE would not be entirely unaffected by difficulties elsewhere in the region. "Regional demand for UAE goods and services is likely to weaken as Mena economies slow. Recovery in foreign capital flows and in domestic bank lending is also likely to be put back by diminished risk appetite."
The bank forecasts economic growth will be 3.4 per cent of GDP this year and 4.1 per cent next year, in line with the IMF and some other economists, but below official UAE estimates.
The report said the greatest economic risk from the political changes was to Egypt and Bahrain, and downgraded growth forecasts to near zero for each in the current year.
HSBC estimated that the recent financial intervention by the government of Saudi Arabia amounted to US$10,000 (Dh36,730) per adult member of the kingdom's population, or some 30 per cent of GDP.