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UAE’s Economy Grows Strong

Mehmood Ul Hassan Khan

According to a recently published report by the Institute of International Finance (IIF) the United Arab Emirates (UAE) is continuing to grow robustly on a base of economic diversity and constant recovery. Perfect law and order situation in the country helps its socio-economy. Its rapid growth of non-oil economy is a giant leap. It has already broadened its macro-economic base which would be further strengthened in the days to come by introducing massive industrialization, diversification of economy, small and medium enterprise development and the last but not the least, lead in renewable energy resources.

It said the real gross domestic product GDP of the UAE is expected to grow by 4.2 per cent this year compared with 5.2 per cent in 2011. Moreover, the nominal gross domestic product of the country is expected to reach US$374 billion (Dhs1.37 trillion) this year compared with US$352 billion (Dhs1.29 trillion) in 2011 and is likely to rise to US$391 billion (Dhs1.44 trillion) in 2013. It shows steady upward growth in the macro-economy of the UAE.

According to different statistical data the country succeeded to uplift its GDP from AED6.5 billion in 1971 to over AED1 trillion in 2010, increase up by 150 folds. Per capita was increased from AED100, 000 in 1975 to AED132, 000 in 2010, a great achievement. According to official figures the UAE foreign trade in 2011 was 23 per cent against 14 per cent in 2010, surging by AED47 billion.

A healthy indicator is that UAE’s oil sector increased by up to 8.3 per cent in 2011 and is expected to grow by around 5.1 per cent during 2012 and by no more than 0.8 per cent in 2013. It shows gradual reduction of macro-economy on the income/revenue of oil production. On the other hand, the non-oil sector is expected to grow by 3.9 per cent this year compared with 3.8 per cent in 2011 and is likely to grow by around 4.2 per cent next year. Non-oil exports increased by over 100 per cent, reflecting increases of Dh731 million (100 per cent) in “Machinery and transport equipment”, Dh553 million (100 per cent) in “Chemicals and related products”, Dh227 million (93 per cent) in “Manufactured goods classified chiefly by material” and Dh199 million (100 per cent) in “Miscellaneous manufactured items”. It verifies the UAE strives towards non-oil economy and means of production and income in the days to come. Inflationary pressure one of the important elements of macro-economy is expected to be contained at 0.7 per cent this year compared with 0.9 per cent in 2011 and no more than 1.5 per cent in 2013. Controlling of inflationary ratios is achieved through consistent policies of the government in the demand and supply chain and proper monitoring of monetary policy. Price hike has already been managed successfully. Essential food items have been frozen. Social nets have been widened.

According to the IIF report (December, 2012), UAE banking industry is progressive and strong. There is no fear of liquidity crunch in the country, the report added. In banking sector credit financing is expected to achieve growth of 3.2 per cent in 2012 and 4 per cent in 2013 compared with 2 per cent last year. Furthermore, the deposits increased by up to 7 per cent. The ratio of loans to deposits remained stable during the year. The UAE governor of Central Bank said the net assets reached Dh1.7 trillion by October 31, 2012 compared to Dh1.6 trillion for the same period of last year. The total deposits amounted to Dh1.16 trillion ($316.4 billion)”. “The net lending by end of October 2012 was Dh1.1 trillion ($74.9 billion) while capital funding was Dh274.3 billion ($74.7 billion).” He added that the total profits of the banks in the UAE reached at the end of last October AED24, 689 billion

The Institute confirmed that the banking sector in the country is much better than it was in 2008 where it can contain the consequences of any possible US or European crisis. Provisioning of the loans has been enhanced. It said the real estate sector, improved remarkably and started to recover in some areas in Dubai. It would be good for the overall GDP % of the country.

The report says the financial surplus of the UAE is expected to reach 4 per cent of the GDP this year and 5 per cent in 2013 compared with 3.3 per cent in 2011. The surplus of current accounts is likely to reach 15.9 per cent this year and around 14.9 per cent in 2013 compared with 11.9 per cent of the gross domestic product in 2011. Surplus of budget is a rarity in the age of global economic recession and financial imbalances.

On the external front, the net foreign assets of the UAE are likely to reach US$447 billion (Dhs1.64 trillion) this year compared with US$410 billion (Dhs1.51 trillion) last year. Foreign assets are likely to reach US$482 billion (Dhs1.77 trillion) or 126 per cent of the UAE’s GDP by the end of next year. It is hoped that these assets are more than enough to support growth and finance any deficit that may arises in the coming days.

In another report of Merrill Lynch (December, 2012), put UAE 2013 GDP growth forecast at a stable 3.2 per cent, citing a steadily recovering domestic economy and a better year for emerging markets. Johannes Jooste, head of strategy, chief investment officer at Merrill Lynch Wealth Management, Europe, Middle East and Africa said “Locally, there is a fair amount of stability in the country”. “Certainly my impression is that the property market is stabilising” he added. He is of the view that tourism and trade sectors as positives for the local economy.

Furthermore, he explained, Property in Dubai, particularly in specific neighbourhoods and segments, has shown good signs of recovery, according to recent reports citing global consultancies and property agents. Project handovers, off-plan sales of Emaar and Nakheel projects and the highly publicised Mohammed Bin Rashid City point to the confidence returning to the real estate sector.

UAE at 41

UAE pervious constant socio-economic achievements put its future bright and stable. It is achieved with the help of sound planning and policies, high public spending, massive investments by the government and private sector. Improved investment laws and business friendly policies succeeded to attract high inflows of the foreign direct investments. Many reports of the UAE Economic Ministry showed the UAE has attracted more than US$75 billion FDI since 1971. Now, it is 2nd largest economy of the world. It is also at first position in knowledge-based economy in the region. It is the second top capital recipient in the region. Moreover, it has the first position as largest capital exports in the region and the 30th top investment in the world. UN Conference on Trade and Development verified that the country has pumped over US$57 billion into foreign markets over the past two decades.

Public spending is used to encourage private sector for investments. It accelerates trade and commerce activities in the country. It speeds-up social programs. It boosts businessmen confidence to start new projects. It provides umbrella to lesser people to live with dignity and honor. It has constantly; increased its public spending by at least 10 per cent annually over the past decade despite sharp fluctuations in oil prices. Most recently, it mitigated bad effects of the ongoing global economic recession in the country. In 2009, the UAE boosted public spending to its highest ever level of Dh289 billion.

Concluding Remarks

UAE at 41 is economically more prosperous. It is politically more articulated. It is socially more vibrant. Diplomatically, it is more engaged to achieve the conflict resolution in the region and around the globe. It is the leader in renewable energy and has already spread its wings in many countries, Spain, UK, Germany, Italy, Korea, etc.

UAE is pioneer in global humanitarian assistance and its friendly gestures reached to shores of Africa to mountains of Europe and deserts of Asia to occasions of the world and made an important contribution. Its social projects around the globe are people friendly and servicing the humanity at its best. It is the hope of all the struggling people around the globe.

In future, it is predicted that its knowledge-based economy would be further enhanced. Its non-oil trade would achieve new levels. Production of non-oil economy would be surged. Small and medium enterprises would be consolidated. Its foreign trade and re-exports would hatch handsome foreign exchange. Its foreign assets would be more consolidated. Bilateral trade with China, Korea and Brazil would be further strengthened.

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