(MENAFN - Khaleej Times) The UAE economy has so far performed well in 2012 and will remain strong in the final quarter of the year, underpinned by higher oil prices even as the world economy is heading into another recession, Standard Chartered said in its latest report.
Dubai's non-oil sectors - including trade, tourism and services - and a pick-up in spending on non-oil projects in Abu Dhabi, as well as healthy output in the hydrocarbon sector boosted the growth in the first nine months, the bank said in its "Middle East and North Africa Focus" report.
The real gross domestic product, or GDP, of the UAE is predicted to grow by 3.4 per cent in 2012, accelerating by 3.7 per cent in 2013 and sustaining a growth rate of 3.4 per cent in 2014, the bank said. The current account balance in 2012 will be 10.2 per cent of the GDP, which will slide to 8.5 per cent in 2013.
The world economy, on the other hand, is projected to gain a 2.5 per cent growth in 2012, rising to around three per cent in 2013, "but only if the US avoids a policy mistake, the euro avoids a meltdown, China relaxes policy to ensure a soft landing and central banks maintain their accommodative stance".
The bank said higher oil prices "will support fiscal conditions in Abu Dhabi and underpin the non-oil project spending pipeline."
"Strong oil prices for most of 2012 played a significant role in driving a healthy economic climate for the UAE, with Abu Dhabi benefiting directly from higher revenues and increased non-oil infrastructure spending, and Dubai's non-oil sectors benefiting from a regional spending boom," the bank said.
The bank noted that Dubai's tourism sector would benefit from the emirate's stability in light of ongoing challenges in the region. "The trade and services sectors will be supported by the relative resilience of the region's economies in light of strong oil prices and healthy fiscal balance sheets."
"With the 3.4 billion Abu Dhabi Midfield Terminal project awarded in early H1-2012, we expect more key non-oil projects to be released towards the end of the year. Abu Dhabi's 2012 fiscal position is very strong in our view, with oil prices significantly above the 75-80 breakeven price we estimate for the emirate. This should underpin the recovery in non-oil government-driven projects, especially in infrastructure development for the remainder of this year," the report said. Abu Dhabi's 2012 oil output is above 2011 levels, up slightly in July to 2.68 million barrels per day, or mbd, from 2.66mbd in June, according to the International Energy Agency.
Oil output has been nudging higher since the end of last year, increasing from a first quarter 2012 average of 2.61mbd to 2.65mbd in the second quarter. "Given such a marginal increase, in direct terms the oil sector will drive little real GDP growth in Abu Dhabi. Rather, via higher oil revenues, the oil sector will indirectly drive the emirate's extensive project pipeline."
In the GCC, higher oil receipts have fuelled growth, from housing construction in Saudi Arabia and infrastructure in Qatar and Abu Dhabi, to oil-sector expansion in most of the GCC. "Dubai, although not a major oil producer itself, is benefiting from spillovers from its oil-rich neighbours," it said.
Dubai, which has a strong logistics and trade infrastructure, is benefiting from the regional infrastructure boom that is driving demand for goods. "Dubai's key re-export markets are now increasingly within the GCC region, and this is largely a good thing, given that we see positive dynamics in the region over the near to medium term, with strong levels of state spending, underpinned by healthy fiscal positions and strong oil prices," the bank said.
Dubai's tourism sector is performing well. First-half 2012 data indicates a continuation of 2011's strong momentum with 28 million passengers passing through Dubai airport, a 13.7 per cent rise year on year. For the full year, record 56.5 million passengers are expected, the bank forecast.
"Dubai hotel guests from the GCC increased by 45 per cent year on year in 2011, as Dubai's stability attracted guests from other countries facing regional challenges. We expect GCC tourists to be one of the largest growth segments into the year-end," the report said.