Dubai, Asharq Al-Awsat- The UAE economy will grow by 6.2 per cent in 2007, according to HSBC, a decline from the estimated 9.3 per cent growth experienced in the country last year. In its recently published “Gulf Economic Forecast,” the bank predicted that the UAE’s annual economic growth rate would slow slightly further in 2008, to an estimated 5.8 per cent.
The bank remains bullish on the outlook for the UAE economy for the coming two years, and says that it expects overall real growth to remain high. According to the HSBC report, the increase in the country’s real non-oil GDP will be even more marked.
Against this backdrop of broad-based growth, HSBC also predicts that the country’s annual inflation rate will be seven per cent this year, dropping to 6.5 per cent in 2008. However, the bank sees the possibility of higher inflation as a real risk, particularly in Dubai.
Simon Williams, HSBC’s Middle East Economist, said: “The UAE is now firmly established as an economic force to be reckoned with – not just in the Gulf region but internationally. While the country’s overall rate of economic growth will slow slightly in the next two years as oil prices ease and production falls, the non-oil sector will continue to expand strongly. The outlook for the UAE, and for UAE companies remains good.”
According to the bank, all the economies of the Gulf will continue to grow in 2007, though at a slower rate as oil prices fall from last year’s record high and OPEC mandated oil production cuts take effect. In its report, HSBC said that the region’s governments will slowly and steadily push forward the reform process in order to create jobs and wealth for their rapidly growing populations.
“The strictures of World Trade Organization membership and bilateral Free Trade Agreements and the increasing levels of competition within the GCC itself are driving reforms,” said Williams.
“2006 was exceptional,” continued Williams, “and it was the breakthrough year. Collectively, the GDP of the Gulf states doubled in the past four years, and 2006 marked the peak of this boom. While we still feel positive about the outlook for the GCC, the boom of the last four years is set to slow.”
He added: “On a weighted basis, we estimate that real growth for GCC will stand at over 5% in 2007 and 2008. These years will see consolidation of gains that have already been made. The short-term future will see the GCC solidify the progress that has been made towards building economies that remain largely energy-based, but which have become far more diverse. The region has built a platform for growth that will continue for the remainder of the decade.”
In a country-by-country analysis, the bank singles out Qatar as being the region’s star performer, with the UAE offering the most attractive balance for investors, while prospects for Saudi Arabia remain strong, despite its exposure to international oil price trends.
“The GCC is now a fully fledged, dynamic emerging market,” said Williams. According to the bank’s estimates, the GCC economy is now roughly twice the size of that of countries such as Turkey, Argentina, South Africa and Poland – countries that have long commanded the attention of global investors.