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Abu Dhabi, UAEWednesday 12 December 2018

Real GDP growth to accelerate in the Emirates in 2018-19, says BMI

Higher oil prices, stronger infrastructure inventories expected to support growth in UAE.

Expo-led construction activity is expected to accelerate real GDP growth. Sarah Dea / The National
Expo-led construction activity is expected to accelerate real GDP growth. Sarah Dea / The National

Economic growth in the UAE is expected to accelerate over the next two years on the back of higher volumes of infrastructure deployment and steadier oil prices, BMI said on Friday.

Real GDP - gross domestic product adjusted for inflation - is expected to grow to 2.8 per cent and 3.3 per cent in 2018 and 2019. Dubai is expected to outperform Abu Dhabi as the UAE's commercial hub is likely to see a flurry of construction activity ahead of its hosting of the Expo 2020.

"Construction opportunities related to hosting the event continue to proliferate. It will also encourage investment in tourism infrastructure - a number of hotels and residential districts are currently under construction - and transportation," the report said.

"While Dubai will likely see the most significant economic gains from the Expo, we expect the other emirates to register robust construction activity moving forward, especially driven by ambitions to diversify the economy away from oil in Abu Dhabi," it added.

BMI also anticipates the UAE's economy to strengthen on the back of expected growth of 8.9 per cent and 9.7 per cent in 2018 and 2019.

Growth rates for the UAE economy has been flat over the last couple of years as the slump in oil prices hit various sectors hard. Since the beginning of 2016, the UAE, which currently holds the Opec presidency cut, around 1.8 million barrels per day of output with 23 other producing states, which helped boost prices.

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Supply gap to push Brent to US$75/b in 2019, BMI says

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Continued compliance with the Opec-non-Opec production curbs has managed to edge the price of Brent to $65 per barrel levels this year. While higher oil prices have given a fillip to headline economic growth, BMI has projected production curbs resulting in a drag on near-term growth as oil revenues contribute to around a third of government revenue.

Oil production in the UAE is forecast to narrow to 0.4 per cent this year from 1.3 per cent previously, according to the analysis by the Fitch subsidiary.

Cut crude barrels from the UAE are expected to "gradually" re-enter the market in 2019, with muted production expected mostly from large, maturing fields in Abu Dhabi.

Earlier in February, the research firm revised its forecast for Brent to a bullish $75 per barrel in 2019 and further up to $78 a barrel in 2020 on a year-on-year average basis.