Powered by an expansion in non-oil industries, economic growth in the United Arab Emirates is catching up to regional peers.
Gross domestic product in the UAE is forecast to grow 3.9 percent in 2013, according to the median estimate of 18 economists in the Bloomberg Middle East Economic Survey, up from 3.4 percent in the previous quarter. That’s the biggest upward revision in the six-nation Gulf Cooperation Council, which also includes Saudi Arabia, the biggest Arab economy.
The UAE economy has lagged behind Saudi Arabia and Qatar since Dubai, its commercial, banking and tourism hub, teetered on the brink of default in 2009. The country’s non-oil economy is forecast to expand 4.5 percent this year, the fastest pace since 2008, according to data compiled by Bloomberg and International Monetary Fund estimates.
“We have been optimistic about what we have been seeing in the UAE in the last 18 months,” said Simon Williams, Dubai-based chief Middle East economist at HSBC Holdings Plc. “It’s a growth story that has substance and it’s gaining momentum. It’s a mix of the export-orientated service sector in Dubai coming back to life and also a slower but a significant recovery in infrastructure spending in Abu Dhabi.”
Dubai’s benchmark DFM General Index for stocks has soared 67 percent this year, while Abu Dhabi’s measure climbed 45 percent after both bourses were upgraded to emerging-market status by index provider MSCI Inc.
Investor confidence in Dubai’s debt has also improved. The cost to ensure the emirate’s dollar debt against default for five years has dropped 20 basis points this year to 205, according to data compiled by Bloomberg. The cost plunged 225 basis points, or 2.25 percentage points, last year.
“Non-oil growth should spearhead activity this year, but hydrocarbon output is also expected to contribute positively,” Giyas Gokkent, chief economist at National Bank of Abu Dhabi PJSC, said by email.
Gokkent said crude oil output is up by 4.6 percent this year, defying his original forecast for a decline.
The UAE sits on about 6 percent of the world’s proven oil reserves. Economy Minister Sultan al-Mansoori said Monday he expects gross domestic product to expand as much as 4.5 percent this year.