Figures released by the UAE’s National Bureau of Statistics have revealed that the Gulf state’s gross domestic product (GDP) increased by 5.2% last year. This was close to a full percentage point higher than 2012’s expansion of 4.4%.
The UAE’s statistical office pinpointed the consistent strength of oil prices in 2013, which averaged $108 a barrel, as a key factor in supporting this growth. But Reuters’ analysts have forecast a slight downturn in the rate of economic expansion through 2014, and next year, with potential growth of 4.3% and 4% respectively.
With hydrocarbons generating at least 40% of the country’s GDP, according to OPEC estimates, it seems probable the gradual retreat in the oil price to $103 a barrel in 2015, according to the International Monetary Fund’s (IMF) prediction in April, via its World Economic Outlook (WEO), will have a marginal negative economic impact. Reuters’ industry analysts have predicted that a strong, steady oil supply, alongside relatively weak demand, could offset the impact of perennial geopolitical tensions and see prices slip even further in 2016 to a little over $100 a barrel.
Such a dip would inevitably affect the UAE’s growth prospects, but the government has previously rolled out plans that will see its current output of 2.7 million barrels per day of crude ramped up by a further one million during 2017. This is likely to provide a cushion to modest price slides in the medium term.
Nevertheless, the IMF foresees a solid outlook for the oil exporting economies within the Middle East and North Africa region, stating in its WEO: “As oil output stabilises alongside strengthening global activity and sustained consumption and investment, total GDP growth is expected to rise to about 3.5% in 2014… In the United Arab Emirates, where real estate prices are rising at a fast pace, the award of the World Expo 2020 has further strengthened growth prospects.”
The US-based Institute of International Finance has predicted that Expo 2020 will add 1.5% per annum to Dubai’s GDP growth over the next six years in the lead up to the event.