Abu Dhabi’s economy is showing signs of recovery amid government spending on projects, says a senior economic official in the emirate.
“We are in the downturn of the economic cycle but we see some signs of recovery,” said Khalifa bin Salem Al Mansouri, the Undersecretary at the Department of Economic Development. “The government is now spending. Those are signs of early recovery. We expect to see more signs of recovery this year and at the beginning of next year.”
Mr Al Mansouri said the projects include a Dh7 billion spending plan announced by Abu Dhabi Municipality as well as tourism projects announced by the Government on Yas and Saadiyat islands.
The Undersecretary, who spoke on Tuesday on the sidelines of a Department of Economic Development conference promoting Abu Dhabi as an investment destination, said about Dh95bn worth of investments were made in the emirate in 2016. That was up by 8 per cent over the 2015 figure.
Property is one of the main sectors when it comes to investment in Abu Dhabi, he said, but the emirate is broadening that out into industries such as finance and hospitality.
Abu Dhabi’s economy was hit harder by the economic downturn of recent years because the emirate is the country’s biggest producer of oil and so its GDP growth relies more on hydrocarbons and state-run enterprises than other emirates do. Signs that its businesses and government-related entities (GREs) are on the rebound bode well, economists concurred.
“A rise in government spending will be positive for boosting economic activity,” said Monica Malik, the chief economist at Abu Dhabi Commercial Bank. “The Government and GREs are central drivers of non-oil activity in Abu Dhabi.” Ms Malik was not able to provide forecasts for Abu Dhabi’s growth because she was in the process of revising them.
Dima Jardaneh, Standard Chartered’s head of economic research for Mena, said the bank has been of the view since the start of the year that Abu Dhabi is likely to experience a recovery in non-oil economic growth because of a reduced need for fiscal consolidation. “The Government opted to front-load a sizeable consolidation in 2015-16, which gives it room now to raise its spending and support a higher level of activity in the economy more broadly. The Abu Dhabi Government remains the main catalyst to drive business sentiment in the emirate,” she said.
Overall, economists at the IMF are becoming more upbeat about the UAE’s economic prospects amid a recovery in the price of oil. The fund said this month that the UAE is adjusting well to the low oil-price environment as non-oil economic growth rebounds in the country this year. It expects the UAE economy to grow by 4.4 per cent in 2018 from 1.5 per cent in 2016.
As for this year, the IMF said the country’s non-oil economy is set to rebound on stronger global trade and investment spurred by Dubai Expo 2020. Non-oil GDP is forecast to expand by 3.3 per cent this year with the budget deficit shrinking to 4.5 per cent of GDP, it said.
Non-oil businesses are beginning to see light at the end of the tunnel after oil shed more than 70 per cent of its value in a crash that began in mid-2014.
Private companies operating outside the oil sector expect to be more profitable in the next six months, a survey by the export credit consultancy Coface recently showed. About 43.5 per cent of exporters and 42 per cent of UAE domestic suppliers forecast profitability in the next six months, with 52.2 per cent and 59 per cent respectively expecting a gain in sales from the previous year, according to the survey.
mkassem@thenational.ae
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