Overview


2013 was the year that the UAE seemed to leave the setbacks of the 2008–9 world economic downturn behind, once and for all.

Across the board, the region’s economy not only bounced back, it surged ahead. Indeed as 2014 appears to be continuing that trend, the emphasis is more on ensuring growth is managed and sustainable than on worrying about where it’s coming from.

Key insights

Growing GDP:
2013 saw a 4% rise in GDP, on the back of a 4.4% increase in 2012. The IMF is predicting a similar figure for 2014, on the back of a renewed investment drive, an accelerated population growth, a dynamic demand from GCC neighbours and stable political environment.

Increasing diversification:
This performance was driven by strong growth in sectors such as retail, tourism, transport and manufacturing, coupled with a resurgence in real estate, construction and overall consumer confidence. The oil and gas sector, at 3% growth, made a comparatively lower contribution, indicating that our economy is perhaps not as reliant on how its major industry performs as it was before (oil and gas still accounts for a 40% weighting of the national economy).

Rising trade:
Both import and export activity is on the up; the former more so – an estimated 12.5% in 2013, while exports rose 5.5%. (Source: Economist Intelligence Unit). This led to a 6.7% contraction in the trade surplus, meaning it contributed 31% of GDP, down from 33% in 2012.

Healthy balance:
There was a comfortable 11.1% fiscal surplus in 2013, adding to those accumulated in previous years. This means that the UAE’s general government gross debt remains more than manageable, at less than 20% of GDP. However the aggregate debt of the Dubai government and its government related entities remains sizable, and although parts of this are being rolled over, there are still a number of redemption milestones to be met.

Spending plans:
The federal budget includes a 4.5% increase in total spending. This prioritises social welfare and development. In addition, the Dubai government has announced that AED 25bn will be set aside for infrastructure projects in the run-up to Expo 2020.

Manageable inflation:
Inflation rose in 2013, to 1.5% from 0.7% in 2012, though it remains well within levels that could cause economic concern. This increase was largely driven by real estate prices, up an average 22% in Dubai (Source: Jones LaSalle), though the Government has recently implemented a number of measures designed to help cool and control the rate of the housing boom.

Booming stock markets:
In 2013 the Dubai stock market rose 107.69%, the best performance in the world. Abu Dhabi, at third best, was not far behind with 63.08%. This performance also needs setting in the context where only 16 of the world’s 76 biggest markets finished the year in positive territory.

Sound banking sector:
The UAE banking system maintains significant capital and liquidity buffers. The sector’s capital adequacy ratio stood at 19% in September 2013, and ratings agency Moody’s changed its outlook from negative to stable in November 2013.
(Source for information unless otherwise indicated: International Monetary Fund)

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