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United Arab Emirates Country Risk Report Q2 2016

  • March 2016
  • -
  • Business Monitor International
  • -
  • 37 pages

Core Views Lower oil prices will hit growth as government spending and consumer confidence falls. We forecast real GDP growth at 2.8% and 2.6% in 2016 and 2017 from an estimated 4.0% in 2015 We expect Dubai to outperform Abu Dhabi, with the former benefitting from increased activity in the trade and tourism sectors, as well as lower exposure to oil prices. Credit growth to the private sector will remain relatively slow through 2016 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.

Table Of Contents

United Arab Emirates Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Growth Slowing, But Non-Oil Sector To Outperform8
The UAE's economic growth will slow over the coming quarters given lower oil prices, and the resultant cutback in government and
private spending The non-oil sector will become the major growth driver
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS9
TABLE: PRIVATE CONSUMPTION FORECASTS9
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 11
Deficits To Force Spending Cutbacks11
The UAE will remain in a fiscal deficit until 2021; however, it easily has enough financial firepower to withstand an era of lower oil prices
Lower oil revenues will force further fiscal consolidation and revenue-raising measures, most notably the introduction of VAT in 2018
Overall, we forecast a fiscal deficit of 61% of GDP in 2016, from a surplus of 48% of GDP in 2014
Abu Dhabi Economic Outlook 12
Structural Slowdown In Place12
Abu Dhabi's economy will undergo a structural slowdown in the coming quarters, primarily on the back of lower oil prices The non-oil
sector will become the key growth driver, with construction the outperformer
TABLE: ABU DHABI - GDP FORECAST13
Dubai Economic Outlook 14
Growth To Slow As Regional Slowdown Takes Its Toll14
Dubai's economy will slow over the coming quarters as the impact of lower oil prices takes effect through reduced consumer confidence
and fiscal tightening on a federal level In addition, the slowdown elsewhere in the region, particularly Saudi Arabia, will have a knock-on
impact on Dubai's real estate and retail segments
TABLE: DUBAI - GDP FORECAST15
Chapter 2: 10-Year Forecast 17
The UAE Economy To 2025 17
Greater Caution, Slower Growth17
After its recent experience of boom and bust, we are forecasting a slower but more sustainable growth trajectory for the UAE over the
next five to 10 years Consumer spending will remain the key driver of GDP
TABLE: LONG-TERM MACROECONOMIC FORECASTS17
Chapter 3: Political Outlook 19
SWOT Analysis 19
BMI Political Risk Index 19
Domestic Politics 20
UAE: Caught Between Two Hegemons20
The UAE will continue to pursue a careful balancing act between Iran and Saudi Arabia; while trying to stay within the GCC's political
zone of influence, it will at the same time keep Iran on side, benefiting from its reintegration into the global market
TABLE: POLITICAL OVERVIEW 20
Long-Term Political Outlook 21
Stable Outlook But Challenges Remain21
The UAE is one of the more stable Gulf states over the long term, with a small, wealthy population, no history of terrorism and no
sectarian tensions to speak of That said, it is not without its challenges
Chapter 4: Operational Risk 25
SWOT Analysis 25
Operational Risk Index 25
Operational Risk 26
TABLE: OPERATIONAL RISK 26
Trade Procedures And Governance 27
TABLE: MIDDLE EAST AND NORTH AFRICA - TRADE PROCEDURES AND GOVERNANCE RISK 27
TABLE: BREAKDOWN OF IMPORT AND EXPORT PROCEDURES AND COSTS 28
TABLE: DOCUMENTS REQUIRED FOR IMPORTING AND EXPORTING 28
Vulnerability To Crime 28
Chapter 5: BMI Global Macro Outlook 33
Global Macro Outlook 33
Tail Risks Mounting Amid Sub-Par Growth33
TABLE: GLOBAL ASSUMPTIONS33
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 34
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%) 34
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %35
TABLE: MACROECONOMIC DATA and FORECASTS37

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