(MENAFN- Khaleej Times) The growth outlook for the Gulf Co-operation Council (GCC) is positive despite ongoing tensions in some parts of the Middle East region, according to a report.
Standard Chartered on Sunday released its quarterly economic research titled 'Middle East and North Africa Focus - Adjusting to reality' and said outlook for the UAE economy is also positive amid considering its robust performance in 2013.
"Dubai continues to perform well, driven by the core pillars of its economy, and in Abu Dhabi the resumption of strong government investment is driving non-hydrocarbon growth. Dubai's measures to ensure healthy pricing dynamics in the property market are a move in the right direction. Abu Dhabi's property market is also picking up, the report said.
The bank's report said the performance of the UAE's economy has been robust for much of 2013 and the last quarter is likely to support this growth.
"Dubai's economy, which not long ago faced severe challenges, is performing extremely well against a backdrop of strong investment in the region, benefiting from its role as a trade and services hub," the report said.
Referring to developments in three different areas, the report said Dubai's bid to host Expo 2020 will have a significant impact on the economy. "The emirate expects the Paris-based Bureau International des Expositions (BEI's) decision on November 27 and we assess the near- and long-term implications for Dubai's economy of hosting these events.
"Second, there are indications that Abu Dhabi's property market is improving. We look at the supporting factors in the capital and the steps Dubai is taking to ensure healthy pricing dynamics.
"Finally, as banking-sector liquidity improves, we look at how credit dynamics are playing out," the report said.
The Emirate of Dubai is one of the contenders to host Expo 2020, competing against Izmir in Turkey, Sao Paolo in Brazil and Yekaterinburg in Russia.
"A key question is what Dubai would gain from hosting the events. We see benefits in the near, medium and long term for Dubai. In the near term there might be a sentiment and confidence boost for the emirate, which has gone 'back to basics' and is experiencing a recovery underpinned by the core sectors of its economy," the report said.
The report further said Dubai government was careful to ensure sustainability in all aspects of its Expo plans, from the use of solar power to the re-use of facilities on the site that will be adapted to provide affordable housing schemes. "We are optimistic that the new infrastructure will be used to host a growing number of international and regional events. In addition, there are plans to convert parts of the scheme into a national museum and research facilities," the report said.
About the housing market, the report noted significant impact of Abu Dhabi government decision regarding shifting of accommodation to the emirate on residential properties and said an estimated 23,000 employees and their families will return to the capital and prices will remain subdued in near term.
In the past 12 months in Dubai, residential prices have risen by 38 per cent for apartments and 24 per cent for villas, with rents up by 20 per cent and 17 per cent, respectively.
"The current rally appears to be driven by fundamentals rather than excess speculation. However, this is exactly the right time for the authorities to be introducing measures to ensure that speculative behaviour does not get out of hand."
The Dubai Land Department has doubled the property tax fee (from two per cent to four per cent from October 6, 2013). The change will affect residential and commercial properties, including off-plan sales and excluding industrial real estate.
"The new regulation should help, as it will penalise such investors the most. One concern is that longer-term investors would have to pay the higher fee as well," the bank report said.
The bank also noted that liquidity dynamics in the UAE have stabilised following a period between 2009 and 2011 when loan-to-deposit ratios constantly breached the 100 per cent level. The improvement was brought about by an increase in the deposit base: overall deposits in the system rose by 12 per cent over the 12 months to July 2013.
About the largest economy in the Middle East, the report said Saudi Arabia has a robust growth outlook, driven by government investment in non-hydrocarbons.
"This is supporting near-term growth dynamics, and moving in the right direction to meet the kingdom€Ÿs long-term infrastructure needs and create employment opportunities," the report said.
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