Weaker economic growth becomes the new normal.
As we approach the third anniversary of the spectacular collapse in oil prices, they remain 50% to 60% below their USD 100 plus per barrel levels last seen in mid 2014. The implications for the UAE have been varied, with emirates such as Abu Dhabi and Sharjah that rely on oil revenues to spur economic growth, seeing growth rates trimmed as the fall out lingers, curtailing expansion across almost all sectors. For Dubai, where oil income forms a fraction of total GDP growth, the impact, while delayed, has also been marked, primarily due to the slowing growth in surrounding Gulf economies, rather than any underlying weakness in Dubai itself.
Conflicts elsewhere in the Middle East, the Qatari diplomatic crisis, the messy Brexit negotiations now unfolding and the unpredictable nature of the Trump presidency in the United States are all weighing on global growth and continue to limit the UAE economy’s ability to register double digit GDP growth.
With the uncertain global economic climate expected to persist, Oxford Economics has forecast that UAE GDP growth by the end of this year will be lower than 2016, rising by 1.7%; the slowest pace of expansion since 2010. Conditions are being exacerbated by the low oil price environment which will drive further consolidation in the sector. This forecast is far more conservative than the UAE Ministry of Economy’s own forecast of 3% growth in 2017. The international Monetary Fund has however made two revisions to its growth forecast for the UAE, with the latest 2017 prediction in early July standing at a mere 1.3%; down from a January estimate of 3.3%. Emirates NBD, Dubai’s largest lender, meanwhile has forecast GDP growth of just 2% nationally this year, down from an earlier estimate of 3.4%.