Economic growth in UAE forecast to outpace rest of MENA in 2016
Author: PM editorial | Date: 13 Jul 2016
Nation considered to have the best long-term prospects, say financial experts
The MENA region is set for its weakest growth since the 1980s but the UAE has better long-term economic prospects than its neighbours.
According to economic research specialists Capital Economics’ Q2 2016 Middle East Outlook, the average GDP growth for countries in the region will be just 1.3 per cent. But institutions including the International Monetary Fund (IMF) and International Institute of Finance (IIF) have predicted the UAE can expect growth of up to three per cent.
Gulf countries are tightening their belts in response to continually low oil prices, meaning government spending on projects that could stimulate economic growth is expected to fall.
"Oil prices are likely to improve from where they are, but they're not going to go back to the figures that we saw in 2013 and 2014 for a long, long time, so this means that many [GCC countries] have to cut back spending and they also have to try to raise revenue outside the oil sector," IMF director Masood Ahmed told the Associated Press.
Bahrain and Oman were predicted to have lower than average GDP growth of under one per cent by Capital Economics’ report and Saudi Arabia may fall as low as 0.3 per cent this year. While the kingdom is not in any immediate danger of financial pain because of its large cash reserves, it has addressed the situation with its Vision 2030 strategy to diversify the economy. According to the IMF, 72 per cent of its revenue last year came from oil.
The IMF recently calculated that oil-exporting countries in the Middle East lost $390 billion because of lower oil prices in 2015, which may rise to around $500 billion this year. In June 2014, a barrel of crude oil was worth $106 but it has since fallen to around $45, even hitting $30 in January.
Qatar’s economy is also likely to find its growth hovering somewhere between two and three per cent over the next two years and Kuwait around 1.5 per cent, according to the Capital Economics report.