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Mansouri: UAE on path to economic recovery

The UAE is firmly on the path to recovery and inflation is expected to be up to 3 per cent this year.

ABU DHABI // The UAE is firmly on the path to recovery and inflation is expected to be up to 3 per cent this year, the Economy Minister Sultan bin Saeed al Mansouri said on Monday, lower than his previous forecast. The global credit crunch sent the top Gulf Arab economies ? Saudi Arabia and the UAE ? into a downturn this year but high state spending and a turnaround in oil prices are helping the world's top oil-producing region get back on its feet.

When asked by Reuters whether the UAE is firmly on the path to recovery Mansouri said: "Yes, definitely at 100 per cent. In the aviation sector the growth has been about 10 per cent this year so far." He did not want to predict the rate of economic expansion in the world's second-largest Arab economy next year, reiterating his forecast last month for 1.3 per cent growth this year. The UAE central bank deputy chairman Omar bin Sulaiman said last week growth could exceed 4.5 per cent in 2010, adding he was not particularly worried about inflation following a shake-out in the property sector.

In September, the central bank governor said the economy could shrink or register a low growth rate in 2009. The International Monetary Fund expects contraction of 0.2 per cent this year and growth of 2.4 per cent in 2010. Inflation, a big headache in the region in the previous years of oil and property-fuelled boom, so far seems to be subdued in the world's third largest oil exporter. "My expectation is we will manage (inflation) between 2.5 to 3 per cent this year," Mansouri told Reuters on the sidelines of a conference.

Asked about the next year he said: "We hope to control it unlike in the last few years." In September, Mansouri expected the annual inflation rate in the UAE to be around 3.5 per cent to 4 per cent in 2009, down from 12.3 per cent last year. He said on Monday consumer price growth was at around 2.6-2.9 per cent on average so far this year. UAE consumer prices fell 0.15 per cent on an annual basis in August, in a first decline since the ministry started providing monthly figures in June, mainly due to fall in food, clothing and rental costs.

*Reuters

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Who inspires you?

I am in awe of the remarkable women in the Arab region, both big and small, pushing boundaries and becoming role models for generations. Emily Nasrallah was a writer, journalist, teacher and women’s rights activist

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