(MENAFN- Khaleej Times) The UAE economy is poised to gain new momentum in 2014 with three key sectors - including huge non-oil sector investments, the buoyant trade and services sector, and the booming tourism industry - primarily driving the upswing in the country's gross domestic product to 4.5 per cent from 4.4 per cent in 2013, Standard Chartered said on Tuesday.
The bank, predicting a better 2014 across the world with the global economy picking up steam to rise to 3.5 per cent from 2.7 this year, and "inflation staying benign", estimated that non-oil project spending in Abu Dhabi would reach $34 billion in 2014 in line with the emirate's long-term development and diversification goals.
The second driver is Dubai's core trade and services sector that would continue benefiting from strong regional dynamics, "as bulging GCC fiscal surpluses drive long-term infrastructure and diversification projects", Standard Chartered said in the Global Focus 2014 report "Rising East, emerging West". In 2013, Dubai's non-oil trade, which was up 16 per cent ($184 billion) in the first half, will end up almost 14-16 per cent higher than in 2012. "For 2014 we expect overall trade to grow 12-15 per cent. Driving this growth will be Dubai's position as a gateway to 55 per cent of trade inflows to the GCC through its ports," Standard Chartered said. The bank expects investment levels in the region to remain strong, driving demand for capital goods imports and benefiting the emirate's logistics and trade sectors.
"The growth in trade across different geographies is another driver; data from the Dubai Chamber of Commerce and Industry shows that trade with Africa in the past five years increased from six per cent as a share of Dubai trade to 10 per cent. This represents a move from $10 billion to close to $30 billion in trade, which makes Africa Dubai's fastest-growing market."
Dubai's tourism sector, the third key growth driver, is likely to have another strong year. "Hotel occupancy rates and tourist inflows to Dubai are very strong. In the first half of 2013, the number of tourists in Dubai reached 5.5 million, an 11 per cent increase over 2012. Dubai's hotels reported 7.9 million visitors in the first nine months of 2013, up 9.8 per cent versus the same period in 2012."
Dubai's hotel occupancy rates reached 81 per cent from 75.5 per cent in the same period last year. Dubai has total 81,492 hotel rooms as of the first half 2013, which means the growth in occupancy is impressive: room stock in Dubai was almost 43,419 in 2009, when occupancy rates were around 68.8 per cent.
Bank economists believe inflation as one of the challenges that should be on policy makers' radar in 2014. "While a spike to the levels of 2006-08 is very unlikely, we believe inflation will begin to rise in 2014. In Dubai, residential prices rose by 38 per cent for apartments and 24 per cent for villas, with rents up by 20 per cent and 17 per cent, respectively, in 2013 first half."
In Abu Dhabi, the property market will benefit from increased demand as project investment drives jobs, further supported by directives that will bring more Abu Dhabi government employees back to the emirate. Overall inflation remains relatively low, with inflation as of September 2013 up 1.26 per cent compared with the same month in 2012.
"We expect inflation in the UAE to pick up to around 4.2 per cent in 2014 as the housing component [39 per cent of the inflation basket] better reflects market conditions."
The bank believes that the hydrocarbon sector is unlikely to directly contribute to real GDP growth in 2014."
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