This year the main theme on the minds of governments, investors, businesses and the public will be the same - the economy, stupid.
One universal theme will dominate for all of us - the economy
This year the main theme on the minds of governments, investors, businesses and the public will be the same - the economy, stupid.
We begin on the home front ...
Abu Dhabi's GDP is estimated to grow at an average annual rate of 5.7 per cent between next year and 2016, Mohammed Omar Abdullah, the undersecretary of the Abu Dhabi Department of Economic Development, said recently in the capital.
A litmus test for Dubai's recovery will emerge next year and in 2014 in the shape of nearly US$42 billion (Dh154.26bn) in debt repayments coming due. How Dubai tackles this issue will provide the clearest sign yet of whether the emirate is firing on all cylinders again.
Meanwhile, according to Business Monitoring International (BMI), deleveraging will remain a prominent theme well into the year for the UAE, as corporates continue to focus on repairing their balance sheets. This will limit activity in the non-hydrocarbon economy, it said in its outlook for the Emirates.
"Abu Dhabi will outperform Dubai over the coming years given its large-scale investment plans targeting the infrastructure sector and ongoing concerns surrounding Dubai's lingering debt repayment schedule. A further tightening in international sanctions on Iran bodes poorly for Dubai's outlook given its trade linkages with the country."
Among UAE residents, the latest Bayt.com consumer confidence index survey shows 35 per cent believe the cost of living will increase in the coming 12 months and 32 per cent think the cost of property will also go up. A larger number are looking forward to a more positive 2013, however. Some 49 per cent believe their personal financial situation will improve and 47 per cent have similar hopes for the UAE's economy. The majority, 52 per cent, also believe business conditions will follow suit, while 37 per cent are optimistic about the availability of jobs.
A fifth will consider buying property - and 64 per cent of those say they will buy new. The three most popular consumer purchases for the next six months will be desktop or laptop computers, say 26 per cent of respondents; it was furniture for 23 per cent, while 18 per cent say they will buy LCD or plasma televisions.
... then follow growth to China
In Asia, Société Générale says China, the world's second-biggest economy, will once again set the pace regionally and globally - in GDP growth at least, which is expected to hit 7.4 per cent. But, it warns, as the world economy is unstable, hopes of external demand supporting Chinese economic growth are fading. "Policymakers have taken a cautious approach toward easing, which shows they are serious about change.
"There is a 30 per cent chance of a hard landing and a 10 per cent chance of over stimulation. A bumpy landing is most likely," the French bank says.
"We think Beijing is well aware that the sensible goal is to achieve a relatively less painful deceleration, rather than a re-acceleration of the kind seen in 2009-2010."
While the BMI does not foresee a prolonged rise in geopolitical tensions in parts of the wider Middle East, it warns a rise in conflict between the West and Iran could result in a deterioration in the UAE's sovereign risk profile given the close proximity and trade ties between the two countries.
It's tougher in the euro zone
In the West the euro zone will dominate thinking, and concerns, yet again.
The euro-zone economy will be impacted by deleveraging, Business Insider predicts. The need to lower debt will affect the region's economic recovery and growth is likely to continue to be driven by fiscal policy.
In its Emerging Europe (EE) 2013 Outlook and Sovereign Review, Fitch Ratings expects the single-currency zone to stagnate in the coming year, after contracting 0.5 per cent in 2012. Overall, Fitch expects EE to grow 2.9 per cent in 2013, up from 2.3 per cent this year.
The Commonwealth of Independent States will outperform central and eastern Europe, led by the resource-rich Russian economy, Fitch says.
How to keep Greece within the euro zone will remain the focus of a long-running debate among Europe's regional policymaking bodies. Last month, euro-zone finance ministers and the IMF agreed to lower Greece's debt and disburse €43.7 billion (Dh205.68bn) in much-needed bailout funding promised in a previously agreed rescue package.
Germany's outlook is considerably rosier. The economy will continue to benefit from domestic demand and improvement in the construction sector, according to Société Générale, although real GDP growth will be a somewhat anaemic 0.8 per cent. But given improving sentiment in China and the United States and that fundamentals in the German economy are strong "any contraction in growth is expected to be short-lived", it says.
Italy is expected to continue in recession. Unemployment has risen while disposable income is shrinking, which in turn has caused a decline in consumption.
In the wider European Union, the United Kingdom's real GDP growth is forecast to be 1.1 per cent for the coming year, Société Générale says, while inflation will be 2.2 per cent. However, the bank warns euro-zone implosion is the biggest risk to the UK economy. Fiscal tightening is also expected to hamper the UK's recovery. Lower inflation should ease the squeeze on households but consumer spending growth will take time to recover.
The US is all about the cliff
Across the Atlantic, the United States economy should benefit as uncertainty over the fiscal cliff is resolved in 2013 and real GDP growth will hit 1.8 per cent, Business Insider says.
The uncertainty surrounding the fiscal cliff - a combination of tax rises and spending cuts - has hurt business sentiment, which should rebound by the summer. GDP growth should pick up in 2014 and 2015 boosted by housing and business investment.
It'll be a risky year for oil ...
In the energy sector, the BMI points out that crude oil will again play a major role for the Emirates. "With global growth slowing, downside risks to oil prices in 2013 are elevated, which could undermine the UAE's macro-economic recovery."
For the wider region in the year ahead, Gulf Oil Review forecasts Opec output will remain strong but with only a few member countries able to increase production from current levels. Libya has reached its pre-war disruption level of around 1.6 million barrels per day (bpd).
"At best, we expect it to maintain this production level. A slight decline in its output, seen in recent months, may even continue," the report says. Iraq can increase its production from current levels of about 3.2 million bpd but is less likely to reach the official target 3.7 million bpd in 2013.
Non-Opec supply outside the US is expected to perform better next year, although the range of estimates is wide, from 100,000 bpd to 500,000 bpd.
In the global oil sector, the US energy information agency (EIA) forecasts Brent and West Texas Intermediate (WTI) crude oil spot prices to average $104 per barrel and $88 per barrel, respectively, in 2013. The projected WTI discount to Brent crude oil, which averaged $23 per barrel in November, will fall to an average of $11 per barrel by the fourth quarter of the coming year, the US Energy Information Administration says. This forecast rests on the assumption that US real GDP grows at 1.8 per cent in 2013, while world-oil-consumption-weighted real GDP grows by 2.4 per cent.
In North America, US oil production is set to easily beat the estimated 6.4 million barrels a day figure for 2012 in the coming year and continue accelerating. It is now estimated to surpass Saudi Arabia by 2022, thanks to oil-rich shale formations and hydraulic fracturing (fracking), the International Energy Agency says.
The key is a pending decision by the administration of Barack Obama, the US president, on the Keystone XL pipeline, a 2,730-kilometre conduit proposed by TransCanada that would have capacity to carry 1.1 million barrels a day from Canada's oil sands to the US Gulf Coast.
... and a bumpy one for cars
The global car sector will find it a rough road again this year, although the UAE is likely to buck the trend again in the next 12 months with 30 per cent of Bayt.com survey respondents saying they will consider buying a vehicle, 49 per cent of whom say they will buy new, significantly more than likely in Europe and the US.
Worldwide, the picture is mixed. Toyota is set to regain the title of world's best-selling car maker from General Motors and Volkswagen this year, as the industry posts a record year. Global 2012 sales will top 80 million cars and lorries for the first time, as robust US and Japanese purchases offset a European downturn, according to estimates from LMC Automotive.
However, in October, Moody's Investors Service lowered its growth forecast for global car sales in 2013 amid sluggish demand in Europe and weakening sales in China.
Next year, Moody's now expects light-vehicle demand in western Europe will decline 3 per cent, compared with its prior view for 3 per cent growth, amid weaker markets in southern Europe, especially Italy.
By contrast, in China, it projects light-vehicle demand growth of 8.5 per cent, although that is down from its January forecast for a 10 per cent increase.
Moody's said the outlook for the car sector remains stable for the next 12 months to 18 months.
There's always time to shop
In the retail sector, UAE sales are forecast to grow from an estimated Dh113.87bn in 2011 to Dh151.36bn (by 2015, according to BMI.
Growing urbanisation is a factor in the buoyancy of the sector. Abu Dhabi in particular is highly urbanised, with the Urban Planning Council projecting that Abu Dhabi City's population will rise to 1.3 million in the coming year.
BMI says food sales in the UAE are expected to increase by 36.1 per cent to $10.52bn by 2015. The UAE's mass grocery retail sector is one of the Arabian Gulf region's largest by value, accounting for two-thirds of the total food and drink market. The value of the UAE's MGR sector is forecast to rise to $7.55bn by 2015, when it should account for 73.8 per cent of the overall food and drink market.
Elsewhere, PricewaterhouseCoopers (PwC) forecasts the Asia-Pacific region's retail sales growth volume to grow 6 per cent in 2013, up from 5.8 per cent this year, with an upward trajectory expected for the industry until 2016 when the market is estimated to be worth $11.8 trillion.
Reflecting the global economic slowdown, the growth targets are significantly lower than the 9.6 per cent growth recorded in 2010, according to PwC's 2013 outlook for the retail and consumer products sector in Asia.
However like most industries, Asia-Pacific remains a top destination for global retail chains. But challenges remain, including slowing regional economies, high inflation and interest rates.
"Asia still holds out the best opportunity for growth and profits for retailers, big and small," PwC says "International retailers, however, will find it difficult to implement any large-scale expansions as sluggish markets at home are likely to constrain their investment resources," says Carrie Yu, PwC's retail and consumer leader for China and Asia-Pacific.
The Chinese retail industry is expected to grow 10.5 per cent in 2013 and an average of 10.4 per cent through to 2016. It will overtake the US as the world's biggest retail market in 2016, PwC says.
India aims for growth
In the subcontinent, the Reserve Bank of India has promised a long-awaited interest rate cut between January and March. Rates have been left on hold since April as the central bank has tried to keep soaring inflation levels under control. It is now expected to shift its focus from inflation to supporting growth. Wholesale price inflation eased marginally to 7.24 per cent in November compared to 7.45 per cent in October. Industry has been calling for a cut, as they argue that lower borrowing costs would boost sentiment and stimulate growth.
India's minister of finance, P Chidambaram, will present the annual budget in February. This will be particularly closely watched because it precedes the general elections, which are due to take place in 2014. The budget includes proposals of revenues and expenditure for the next financial year, which begins on April 1. With a gaping budget deficit and slowing growth in the Indian economy, while India's poor have struggled with rising prices, the whole country will pay close attention to the event.
A green light for energy
In the green energy industry, a comeback from a difficult 2012 is likely. Environmental concerns remain entrenched in Europe and the US. In developing economies such as China, renewables are seen as an integral part of a diversified energy mix. In the Arabian Gulf, the traditional reliance on hydrocarbons is yielding to a more sophisticated approach, driven by a regional shortage of natural gas.
The International Renewable Energy Agency (Irena) says future energy projects provide growth opportunities for many countries. The agency is adding momentum to the recent increase in investment in renewable energy with the roll-out of the first allotment of its $350m funding cycle in conjunction with the Abu Dhabi Fund for Development (ADFD).
The two institutions, based in the capital, are working together to incentivise innovative renewable energy projects in developing countries. Irena is accepting applications from such projects until January 12 for $50m in ADFD concessional loans in the first of its seven funding cycles.
"This financing from ADFD, administered with the support of Irena, will help projects that are innovative and replicable to get off the ground," says Frank Wouters, Irena's deputy director general.
"By making such projects bankable, we believe we can create substantial growth opportunities for renewables in energy-poor countries."
Irena forecasts that GCC countries can achieve up to $200bn in returns by 2030.
Take the boat to work
In the UAE transport sector, the Roads and Transport Authority (RTA) of Dubai is reviewing its marine transport master plan launched in 2006.
A new master plan will be drawn up taking into consideration the changing face of Dubai shoreline.
"In 2006, we had six marine stations, now we have 37. Our idea is to use marine transport as an alternative to road and rail transport apart from making it a tourist attraction. We believe that in the long run marine transport will help reduce traffic jams on roads," the RTA says. More than 14 million commuters use RTA's various marine transport modes every year.
The agency said two new ferry routes - between Al Ghubaiba and the cruise terminal and another between Dubai Marina and Burj Al Arab via palm Jumeirah - will attract more commuters, and more routes were being planned.
Welcome to Sharjah
Visitors and consumers are set to continue the UAE's booming hospitality sector this year.
From this year the UAE's tourism and shopping sector has been projected to grow at an impressive 6.5 per cent per year from now until 2021, according to a study by the World Travel and Tourism Council.
That forecast is a boost to the prospects of the UAE's entertainment and shopping destinations, particularly new attractions such as Al Shaab Village in Sharjah. The study reveals the vast majority of tourists' expenditure in the UAE (74.7 per cent) is devoted to leisure activities.
Abdulla Al Dah, the chief executive of Al Zajil Fair Management, is upbeat about the growth projections. "These optimistic forecasts confirm our belief that this is the perfect time to launch [new ventures such as] Al Shaab Village. There was a high turnout of shoppers, families and general leisure tourists in its first phase."
Al Shaab received its first visitors in the summer and the second phase is due to open this year.
And lastly, take off
The region's airlines look likely to have ridden out a period of turbulence well. Middle East aviation is forecast for tremendous growth with expectations that Middle East and North Africa hub capacity will reach just below 200 million by 2018, thus exceeding the combined capacity of Heathrow, Paris Charles de Gaulle and Frankfurt, according to Mena Outlook Aviation. There is no doubt that the Middle East region truly has emerged as a global aviation powerhouse, it says.
Globally for the coming year, the International Air Transport Association (Iata) estimates industry profits rising to $7.5bn, as economic forecasts point to slightly stronger economic growth and lower oil prices. That's a better result than 2012 but with a profit margin of only 1.1 per cent of revenues, it still represents a return on capital far below other industries. The modest improvement is based on a forecast for global GDP of 2.5 per cent growth up from 2.1 per cent in 2012. This will help to fuel passenger traffic expansion of 4.5 per cent and cargo expansion of 2.4 per cent.
Cargo markets, while expanding with strengthening world trade which - is forecast to grow at 5.1 per cent, ahead of the 3.4 per cent growth expected in 2012 - will see yields fall by 1.5 per cent. Passenger yields are expected to remain flat.
Regional divergences will persist next year. North American airlines are expected to continue to improve profitability based on tight capacity management.
Asia-Pacific carriers will see a profitability boost from improved cargo volumes. Europe is expected to be the only region whose airlines will be in the red for 2013, Iata says.