UAE real GDP growth forecast to slow to 0.9% in 2017 – BoA Merrill Lynch

The bank said the growth forecast masks a likely contraction in the oil sector due to the OPEC deal

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The UAE is expected to see real GDP growth slow to 0.9 per cent this year from 2.2 per cent in 2016, according to Bank of America Merrill Lynch.

In a report, the bank said the growth forecast masks a likely contraction in the oil sector due to the OPEC deal but non-hydrocarbon real GDP growth is expected to pickup from 2.3 per cent last year to 2.7 per cent this year.

Read: OPEC, non-OPEC oil producers discuss output-cut extension

Further non-oil GDP growth of 3 to 3.5 per cent is forecast in the medium-term on the back of “greater Expo 2020 projects”, it added.

The bank said the world expo would likely see GDP growth increasing by 0.5 per cent in Dubai from 2017 to 2019 after slowing from 4.1 per cent to 2.5 per cent in 2016.

During the event additional growth of 2 per cent is expected due to higher job creation, consumption and tourism flows.

However, after a small budget surplus last year modest 1-2 per cent deficits are expected from 2017 onwards due to costs associated with the new airport, metro lines and Expo 2020 itself.

In Abu Dhabi, the lender said non-oil real GDP growth had slowed considerably due to fiscal consolidation, standing at 2.8 per cent last year from 5 per cent in 2015.

The emirate was described as being on track to record a surplus this year with oil prices at $50 a barrel.

“The 2017 budget assumes a surplus of Dhs15bn ($4.1bn; 1.9 per cent of GDP) on revenue projections of Dhs285bn (up 10 per cent versus 2016 outturn) and spending targets of Dhs270bn (down 6.2 per cent versus 2016 outturn),” it said.

Despite this, Abu Dhabi’s spending is expected to remain tight in the medium term at a flat Dhs250bn, down 7.4 per cent on this year’s budget, with increasing revenues to come through VAT, crude oil production increases and the stabilisiation of the oil price.

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