The Global News Source for the World of Science
24 January 2019Lab Chat
According to the latest predictions from the International Monetary Fund (IMF), the UAE economy is expected to prove resilient in the face of geopolitical uncertainty and looming trade wars over the next 12 months. National gross domestic product (GDP) is projected to increase by 3.7% in 2019, which is a significant improvement on the 2.9% predicted for 2018 and the 0.8% in 2017.
The two main catalysts for the country’s continued growth are the recent rise in global oil prices and the nuances of the national fiscal adjustment project. In comparison to other Gulf Cooperation Council (GCC) countries, the UAE’s economy is viewed as particularly robust due to its diversity, security and openness to foreign investment.
The country suffered a difficult year in 2017, when the overall economy grew by a mere 0.8%. That was largely due to a slump in Abu Dhabi’s GDP, which fell by 0.5% that year, and a relatively modest increase in Dubai, where it grew by 2.8% in 2017.
Last year, Abu Dhabi was predicted to enjoy a similar growth rate as its counterpart Dubai did the previous year at 2.7%, while the latter was given a forecast of 3.3% growth. Both are projected to outperform those percentages this year, with Abu Dhabi believed to enjoy 3.4% growth and Dubai 4% growth in 2019.
Despite individual increases in each city, economists project the Emirati economy to grow by between 2.5% and 2.8%. That is slightly lower than the 2.5-3% growth predicted last year. Nonetheless, a business economy which is ranked 16 in the world and comparative political stability should see the UAE still prosper where other countries may struggle.
That reduction in the GDP forecast was a result of rising geopolitical tensions in the Gulf and beyond. Donald Trump’s ongoing trade war continues to affect global markets, while the Organisation of Petroleum Exporting Countries (OPEC) has already indicated it will cut production in 2019 to stabilise oil prices.
As part of that commitment, the UAE will reduce its daily output by 2.5% in January from figures recorded in October. Overall it will contribute 90,000 less barrels per day, making up part of a pledged deficit of 800,000 barrels by OPEC nations as a whole. Given that oil output in 2018 was particularly low, however, economists do not see this as a major problem.
“This [oil output] should still be higher than the 2018 annual average, given the lower oil output in [the first half of 2018],” explained Monica Malik, who is the head economist at the Abu Dhabi Commercial Bank. “Thus, the oil sector should still see positive real growth in 2019 [which only takes into account output changes], albeit at a more moderate pace than our previous forecast.”Download PDF