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UAE Economy Predicted to Grow in 2017

The UAE economy is expected to gain traction moving further into 2017, despite a poor performance in 2016. A leading Middle East business intelligence service predicts economic growth in the UAE will reach 4.4% in the next 12 months. The main growth sectors will be manufacturing, trade, and investment.

According to the IMF, the economic recovery in the UAE is in line with the broader picture worldwide and is due to "…buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade..."  The IMF expects the global economy to rise by 3.5% in 2017.

In a statement, the IMF said: "Stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016.”

Oil Prices Boosting Economic Growth

Experts believe that a widely anticipated recovery in oil prices is supporting economic growth in the UAE. The UAE has been largely immune to the effects of low oil prices in the last few years. Unlike some of its Gulf neighbours, the UAE has a diverse economy, political stability, and excellent infrastructure. Increased oil prices, coupled with an increase in consumer spending, are a welcome boost to the economy. Nevertheless, OPEC production cuts could extend beyond the June deadline, so this will have a dampening effect on economic recovery.

Recovery in the Banking Sector

The UAE economy supports global business and has a thriving banking sector. Two of the UAE’s biggest lenders, the National Bank of Abu Dhabi and Emirates NBD, posted positive first quarter results. Emirates NBD posted a net profit of 3.6%, which is Dh70 million higher than the previous year.

The banking sector has suffered in the last few years, but despite tough trading conditions, it is in better shape than many banks worldwide. Rising bad debts and a slump in business lending have taken their toll, but rising oil revenue is reversing those deficits. The rise in quarterly profits is, in part, down to a fall in non-performing loans and greater cost cutting efficiency in the banking sector. It is a welcome sign that the UAE economy is moving into an expansion phase.

VAT Revenue

The UAE is introducing VAT later on this year. This is expected to generate Dh 12 billion in revenue, which is approximately 1% of GDP. To plug the budget gap, the UAE also sold off £5 billion in sovereign bonds in April. A federal law is in the process of being finalised, which will allow individual emirates to issue sovereign bonds. This is likely to attract a lot of investor interest.

Increase in Major Project Spending

A modest boost in oil production is supported by increased investment in the Emirates. $155bn of major infrastructure projects were executed in 2016 and a further $629bn of projects are currently in the pipeline. Dubai is hosting the 2020 World Expo, which is providing the impetus for many major projects to go ahead.

Forex Trading in the UAE Remains Strong

Experts from ADS Prime say forex trading looks set to remain strong throughout 2017, as liquidity remains stable in the region. Many UAE investors are trading on the prospect of undervalued major pairs as the Trump presidency and Brexit causes political and economic upheaval. In a fast-moving market, forex trading in the UAE is the best way to realize significant gains.

Despite growth across many sectors, there are still risks at large in the UAE economy. If oil prices fail to increase, it will intensify challenges faced by the Emirates, but most economists believe the UAE has the resources to face these challenges head on.

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