The economies of the UAE and Gulf are expected to withstand major turmoil from the ongoing crisis of the Euro zone and US, Standard and Poor's says.
Euro crisis not likely to hurt Gulf, S&P says
Standard & Poor's says the economies of the UAE and nearby Gulf countries will withstand major waves from the ongoing crisis in the euro zone and US.
Oil-exporting countries in the Gulf will benefit from GDP growth of about 4 per cent next year amid improving liquidity among banks and extensive stimulus measures, according to the credit ratings agency.
While growth next year in this region, including the UAE, is expected to slow compared with this year, it will still be significantly higher than in many established markets and in a range "which any developed western European economy would die for", said Christian Dinwoodie, the managing director of corporate ratings at S&P, on the sidelines of a forum that the agency held in Abu Dhabi yesterday.
Last month, S&P lowered its growth projection for the euro zone for next year, from 1.5 per cent to 1.1 per cent, because of a deteriorating business climate.
Weaker conditions in the US have meant growth prospects there have been lowered for next year, from 2.2 per cent to 1.9 per cent.
S&P says it does not expect the US or the euro zone to slip back into recession. However, the agency does estimate the likelihood of a new recession to be about 35 per cent in the US and about 40 per cent in western Europe.
"Given the prevalence of supply from the UAE into Europe and the US, inevitably there's going to be a ripple into this region, although there is an inherent strength in this region, which means that it is somewhat insulated," said Mr Dinwoodie.
Improving trade flows from the Emirates, and particularly Dubai, have recently helped to buffer the local economy against a downturn. Direct exports from Dubai totalled Dh45 billion (US$12.25bn) in the first half of the year, up 36 per cent from Dh33bn in the same time last year, according to figures released this month by a unit of Dubai's Department of Economic Development.
Economic harm from the Arab Spring uprisings is being felt most in Middle Eastern and North African countries that do not produce oil and are more closely linked to Europe for non-oil trade, according to S&P.
The GDP of non-oil exporters is expected to grow 2.3 per cent next year, though Mr Dinwoodie said the long-term picture for those countries looked more promising.
"Once this period of instability is passed, we do think those non-oil economies will re-emerge and progress," he said.