Outlook for UAE economic growth improves, poll says

Since Opec and non-Opec countries agreed to curb output in December, Brent crude prices have risen by 10 per cent to about $US55 a barrel. Lucy Nicholson / Reuters

Economic sentiment in the UAE is improving amid a rise in oil prices and a pick up in activity in non-oil sectors since the end of last year.

According to the majority of respondents to a survey commissioned by The National, the outlook for economic growth in the UAE has strengthened since the final quarter of last year.

About 45 per cent of respondents to the question strongly agreed while 47 per cent of those asked agreed, according to the survey undertaken by Borderless Access. Only 8 per cent of those polled disagreed with the notion, the survey results showed.

“The poll result shows the active focus of the UAE population on the recent macro and micro economic events in the region,” said Dushyant Gupta, the senior vice president at Borderless Access. “The overall trend shows the positive mindset and also the expectation for the economic turnaround and return of high growth rates.”

Borderless Access interviewed hundreds of professionals in the UAE for the survey.

The results match an increasing number of indicators, from corporate earnings to purchasing manager surveys (PMI) and forecasts from the IMF, that the country’s economy is on the mend following several dismal years after the oil price crash that began in the summer of 2014.

The IMF said in October that the UAE projected a 2.3 per cent growth for last year and 2.5 per cent this year. Before 2015, the economy had been growing at more than 4 per cent for several years amid high oil prices.

National Bank of Abu Dhabi, the biggest lender by assets in the UAE, said last month that it expects the UAE to lead economic growth in the Arabian Gulf this year amid higher spending that will be spurred on by recovering oil prices.

Since Opec and non-Opec countries agreed to curb output in December, Brent crude prices have risen by 10 per cent to about $US55 a barrel.

While the region is heavily dependent on oil sales, the UAE has been among the countries in the region that has done a better job of diversifying its economy and coming up with new streams of revenue, according to NBAD’s annual global investment outlook.

Backing up these assertions is the harder PMI data. The UAE’s non-oil business activity rose to a six-month high in January, thanks to a rise in new orders, higher output and improved demand from overseas, according to the latest sentiment survey from Emirates NBD.

The Emirates NBD/IHS Markit PMI, which measures the economic confidence of business managers in the manufacturing and services industries, increased to 55.3 last month, up from 55.0 in December. A figure above 50 means businesses in the country are expanding, while a reading below 50 signals a contraction.

Many economists say that despite several encouraging signs oil prices still remain low compared to their historic performance and that a strong US dollar, to which the dirham is pegged, will weigh on the competitiveness of the UAE.

“Encouragingly, we’ve seen the PMIs find a floor, rising for the fourth consecutive month in January,” said Razan Nasser, a senior economist at HSBC in Dubai. “The Department of Tourism and Commerce Marketing also reported a 5 per cent increase in overnight visitors [to Dubai] in 2016.

“All of this is in line with our view that the UAE is set to be the Gulf’s strongest economic performer in 2017. However, we expect this growth to be muted in contrast to historic performance. Oil prices remain too low to trigger a recovery even with their recent rebound and the USD-driven gain in the real effective exchange rate should continue to weigh on competitiveness through 2017.”

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