Things are looking up for the UAE , according to its economy minister Sultan Mansouri, who is reported as saying that he expects “clear skies ahead compared with the overcast conditions of last year”.
The forecast is for positive growth of three per cent this year despite uncertainties and risks such as weak credit growth, reports the Standard Chartered Global Focus for September 2010. It says, “Inflation is low, and this is unlikely to change; in fact, we believe the official numbers may overestimate inflationary pressures. However, with bank loans still exceeding deposits, credit conditions are likely to remain tight.”
Global Focus also reports that growth is occurring in both the oil and non-oil sectors. “The oil sector makes up close to 30 per cent of the UAE economy. In 2009, it was one of the biggest drags on growth as the UAE cut production by close to 12 per cent versus 2008 levels. In addition, oil prices dropped from an average of $99/ barrel in 2008 to about $62/ barrel in 2009, making expansionary spending more challenging. Higher oil prices and stable production should allow the oil sector to make a positive contribution to growth in 2010.
“There is also positive news from the non-oil sectors of the economy. The trade sector is significant for Dubai, with the ‘trade and wholesale’ component making up close to 40 per cent of Dubai’s GDP. Official figures show that Dubai’s non-oil trade increased by 18 per cent y/y in 2010 to $76bn. Exports rose by 38 per cent to $8.93bn, and imports climbed by 13 per cent to $48.3bn. More importantly, re-exports rose by 20 per cent to $18.78bn. The reexport sector is of particular significance, as Dubai is the world’s third-largest reexport hub after Hong Kong and Singapore.
“Dubai’s aviation sector is also showing strength, with the number of passengers travelling through Dubai International Airport hitting 4.3 million in July this year, up 14.3 per cent from a year earlier. Year-to-date through July, passenger numbers were up 16 per cent to 26.8 million.
“Air traffic cargo is also picking up – the emirate handled 197,845 tonnes in July, a 23.5 per cent increase over the same month last year, while the year-to-date figure was 1.3mn tonnes, up 25.5 per cent from last year. Abu Dhabi’s aviation sector is also growing, with passenger numbers rising by 9.2 per cent y/y in July, while air cargo traffic increased by 12.3 per cent.
“Hotel occupancy rates in Dubai had bounced back to 80 per cent by June 2010, after plunging to close to 50 per cent in January, according to government statements. Abu Dhabi reported a 16 per cent y/y rise in the number of hotel guests in July, the ninth consecutive month of double-digit growth…”
The report also added that inflation was “probably lower than statistics suggest”.