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UAE Macro-Economy Stands Tall

Mehmood Ul Hassan Khan

The Institute of International Finance’s assessment that the UAE’s GDP is growing by 4.7 per cent in 2013, up from the earlier estimate of 3.9 per cent, comes as no surprise. UAE’s macro-economy maintains its leading status in the GCC and MENA in terms of seeking foreign direct investment, service sector, tourism, trade, banking and above all easing of doing business.

The latest assessment (November, 2013) shows confidence of the different international agencies on the outclass performance of the UAE economy during the 2012-2103 despite US shutdown, EU economic meltdown and slowing of China. Even regional political instability, societal fragmentation and economic doldrums the UAE national economy leads the ways towards more socio-economic prosperity, industrial production, rigorous commercial diplomacy and above all strong commitment of the leadership to achieve wonders,

Global slump remained the biggest worry of the G-20 which is still not in comfort zone of prosperity, stability and sustainability. Absence of sustainable development has been one of the main indicators of the world economy which has already produced serious dints in the future prospects of global economic recovery. The US growth rate has been confined to around 2.3 per cent from the earlier 2.6 per cent, India saw its growth downgraded to 4.7 per cent from 6.1, and Japan was pegged at an average 2 per cent growth. On the contrary, the UAE’s economy has fast-tracked due to higher government spending in Abu Dhabi, and higher trade, tourism and transportation in Dubai as well as the capital. Now its surge in real estate industry is real and not the bubble.

The Global Property Guide (October, 2013) said real estate prices increased approximately 18 percent in the second quarter of the year and Dubai was accorded the top spot among 42 cities. It is also strongly endorsed by the Standard Chartered Bank saying there are no bubbles, it is indeed the outcome of the improved economic indicators that driving the property market. It is predicted that the UAE would be benefiting from the positive developments in the region especially a World Expo in Dubai and Qatar’s hosting World Cup 2022.

The current report published by the World Bank (October, 2013) ”The Ease of Doing Business”, provided a reason for the UAE tremendous performance. The latest report ranks UAE top in the GCC and MENA and up three places in the world order, placed 23rd. The group said the UAE was one of the world’s best places to do business in for a variety of reasons. Diversified reasons are not confined to rolling, getting electricity, paying taxes, and trading across borders.’ Moreover, the opening of Al Maktoum International Airport, Dubai in recent times is a strategic development that will further strengthen its service sector and a value-addition in the overall GDP percentage during 2014 and beyond. It would also strengthen transport and tourism sectors.

The country is emerging as the regional leader as a capital exporter and commercial hub. Domestic consumption in the UAE, involving spending on goods and services, is also by far the highest in the Arab world, standing at nearly $25,000 in 2011.

The Saudi American Bank (Samba) recently published report (October, 2013), UAE’s surge in non-oil growth and massive industrialization will keep its revenue high and it will allow it to record another large fiscal surplus in 2013. It may achieve its highest levels of around 9.3 per cent from nearly three per cent in 2011 according to the current report of the SAMBA. It predicts that UAE will run healthy fiscal surpluses of around six percent a year.

The UAE, the second largest Arab economy, suffered from a CFA deficit of around Dh29.5 billion in 2010 due to lower oil prices and a sharp rise in spending within fiscal stimulus measures adopted by the government in the wake of the 2008 crisis.

The UAE banking system is resilient and strides towards achieving high standards of efficacy, resources mobilization, credit monitoring and the last but not the least, maintaining a pragmatic regulatory mechanism in the country. Despite global poor banking performance since 2009 the UAE banking industry has been robust. A rapid rise in its banking activity also turned the UAE into the region’s main financial centre and allowed its banks to control the largest assets in the Middle East, standing at nearly Dh1,763 billion in 2012-2011 more than 15 percent of the total assets of the Arab world’s nearly 450 banks.

UAE central bank report indicates that it has doubled its deposits with other banks in the first five months of 2013. Its overall assets swelled by nearly 4.3 percent to reach one of their highest levels at the end of April, 2013.

Moreover, Central Bank data showed deposits with other banks hit an all-time high of around Dh90.9 billion at the end of April compared with Dh43.6 billion at the end of 2012, an increase of around 108.6 per cent in just five months.

The Central Bank said it focuses on diversification of markets and tools as well as safe and profitable instruments, mainly held-to-maturity investments, which are non-derivative financial assets with fixed or determinable payments and fixed maturities Held-to-maturity investments are measured at amortised cost, using the effective interest rate method. It put its net profits at around Dh3.7 billion.

The economic stability and sustainability has successfully transformed the UAE into an investment hub and pushed it to the second largest destination for foreign direct investment (FDI) for so many years. IAIGC data showed that it has attracted more than $76 billion in FDI since it was created to emerge as the second largest foreign capital target in the Arab world after Saudi Arabia. The report the FDI flow into the UAE amounted to nearly 12.6 per cent of the total Arab FDI inflow of $603 billion. The UAE also accounted for nearly 24 per cent of the FDI flow into the GCC and 0.4 per cent of the world’s direct capital. Prospects are even higher in the 2013.

Concluding Remarks

The ideal combination of visionary leadership, continued economic liberalization, regulatory mechanism, availability of world class infrastructure, flourishing service sector and the last but not the least, stable money markets along with banking industry all stand tall for the further strengthening of its macro-economy, production and progress in the days to come. Moreover, its diversification of economy and energy mix would be definitely turn dreams into realities in the days to come.

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