The UAE’s non-oil economy will this year grow at its sharpest rate in seven years, the Institute of International Finance has forecast.
“Leading economic and financial indicators for the UAE in the first quarter of this year point to a further acceleration of non-hydrocarbon growth to 5.2 per cent in 2014,” said Garbis Iradian, the deputy director for Africa and the Middle East at IIF, the trade group of financial institutions, speaking in Dubai yesterday.
Levels of non-oil growth are closely watched by economists covering the GCC as a broad gauge of the performance of the economy, as well as serving as an insight into diversification efforts.
The strength of Dubai’s economy and the non-oil parts of Abu Dhabi’s economy have picked up since the global financial crisis and a debt crisis in Dubai in 2009 dented investor sentiment. Underpinning growth in the past year have been rises in equity and property prices, strong airport arrival and purchasing managers’ index (PMI) data, as well as an improvement in credit default swap spreads, said the IIF.
It forecast overall GDP growth to ease to 4.2 per cent for the year, down from 4.7 per cent last year, because of a slowdown in oil output. Dhabi's economy would expand at 5.6 per cent, its highest rate since 2007, it estimated. Dubai Statistics Centre forecast yesterday that growth would reach close to 5 per cent this year.
“It is expected that growth, according to available information, will reach around 5 per cent in 2013 compared to 2012,” the executive director Arif Obaid Al Muhairi said on the statistics office’s website. “We expect that the current year will witness growth close to these rates.”
The IIF addressed several risks to the outlook for the UAE’s economy.
It said the probability of a large correction in the property market was "fairly low", given the measures by the authorities to cool down the property market. Concerns have escalated about the potential for a speculative bubble after prices rose by an average of 45 per cent last year in key Dubai neighbourhoods, according to the website propertyfinder.ae. In response, the Central Bank has introduced caps on mortgage lending, while property fees in Dubai have also risen.
The IIF said investors have been more cautious this time around, while policymaking had improved and credit growth — a key feature of asset bubbles — had remained relatively modest despite an acceleration last year. Credit growth in December was 7.1 per cent, well below the average of 18 per cent for the period 1996 to 2012, according to the IIF.
It also said that the transaction value of land sales was not excessive. The IIF cited Dubai Land Department figures showing the transaction value of Dubai property sales was US$38.3 billion last year, compared with $65.1bn in 2008.
The IIF also cited figures showing the UAE’s house price-to-income ratio was the lowest among similar emerging and developed economies and below the peaks of 2008. Finally, private capital inflows were, so far, still below their peak of 2007, it added.
The other risk the IIF cited was the risk of a fresh build-up of debt in Dubai. Dubai was given a boost in March when the Abu Dhabi Government and the Central Bank agreed to roll over, until 2018, some $20bn of debt that dates to the depths of the 2009 financial crisis.
“This does not wipe out the debt, it simply pushes it back five years,” said George Abed, senior counsellor and director for Africa and the Middle East at the IIF. “The total gross value of Dubai’s debt to GDP is still way above GDP — something like 137 [or] 138 per cent.”
He said it was important Dubai did not get into the same pattern of financing through debt as it did during its boom before the 2009 financial crisis.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Super heroes
Iron Man
Reduced risk of dementia
Alcohol consumption could be an issue
Hulk
Cardiac disease, stroke and dementia from high heart rate
Spider-Man
Agility reduces risk of falls
Increased risk of obesity and mental health issues
Black Panther
Vegetarian diet reduces obesity
Unknown risks of potion drinking
Black Widow
Childhood traumas increase risk of mental illnesses
Thor
He's a god
MATCH INFO
Real Madrid 2 (Benzema 13', Kroos 28')
Barcelona 1 (Mingueza 60')
Red card: Casemiro (Real Madrid)
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
