DUBAI: The UAE’s economy will expand by 2.9 per cent in 2018 as oil production returns to growth, according to BMI. The economy will expand after curbs in oil production are expected to slow down the economy to 2.2 per cent growth this year, from a previous forecast of 2.8 per cent. The Arab world’s second largest economy, grew 3.0 per cent in 2016.
The UAE reduced its oil production as part of an agreement reached by OPEC and non-OPEC oil producing countries in late 2016. That agreement was extended a further nine months in May 2017, which will slow down the economy this year. “We forecast that production will fall by 0.1 per cent in 2017, compared to a 2.2 per cent expansion in 2016. An easing of the production curb in 2018 will see production return to growth at 2.1% in 2018, contributing to the pick-up in the economy,” BMI said. The World Bank has said growth slowed sharply across the GCC to 1.6 per cent this year as the impact of low oil prices weighed on investments in non-oil sectors. The UAE has taken steps to curb government spending, liberalising fuel markets, while also reducing electricity and water subsidies.
The International Energy Agency and OECD have said subsidies in member countries totaled between US$55 billion and $90bn between 2005 and 2014. The IEA said that 10 countries accounted for almost three quarters of the world total for fossil fuel consumption subsidies, and five were in the Middle East North Africa region. Strategy& said earlier this year GCC states could generate $114bn in revenues from sales of utility and airport assets alone. BMI said it is “more positive” with regards to the UAE’s non-oil economy, whose “relatively strong performance…will offset some of the oil sector’s drag.” Growth in the UAE’s non-oil economy is being stimulated by the global transport and logistics hubs of Port Khalifa, Abu Dhabi International, Jebel Ali, Dubai International and Al-Maktoum International, which are benefiting from a global uptick in trade, BMI said. The consultancy said tourism continues to expand and the construction sector is set to perform strongly in the run up to the upcoming Expo 2020 on the back of infrastructure spending and investment.