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UAE ECONOMIC OUTLOOK – 2015

IMF forecast UAE economy to grow at modest pace in 2015-16 weathering the recent slump in the oil prices. This anticipated growth is backed by the non-oil sectors contribution to the country’s GDP in 2014 providing much need economic stimulus.

Gross Domestic Product (GDP) – In 2014, UAE’s GDP grew at 4.3% with the non-oil and gas sectors which includes the real estate, retail, tourism and logistics etc., tentatively contributing 62% towards the GDP, while the oil and gas sector contributed 38% towards the UAE GDP.

UAE GDP

GDP Forecast – Nevertheless, IMF has lowered its 2015 GDP forecast for UAE by one percent to 3.6% citing slump in oil prices as the main reason. According to the IMF’s report, the UAE economy is projected to grow at 3.6% in both 2015 and 2016 whereby in isolation, Dubai and Abu Dhabi’s economies are expected to grow at 4.5% and 3% respectively in 2015.

UAE GDP

Budget Expenditure – UAE cabinet approved AED 49.1 billion-draft federal budget for the year 2015, an increase of 6.5% as compared to 2014. The breakdown of the budget shows that 49% of total budget (AED 24 billion) will be spend on social development and social benefit, 41% (AED 20 billion) on government affairs and 3.7% (AED 1.8 billion) on infrastructure.

UAE budget-expenditure

UAE Inflation and GDP Rate (%)

The projected annual inflation rate in 2015 and 2016 is 2.3% and 2.5% with biggest increase in housing expenditure by 2.48% due to increase in housing cost. However, inflation is still below its historic average, which indicates that the economy is steadily growing with unemployment rate reduced to 4.2% in 2014.

UAE Inflation rate

Economic Projections – Based on economic data, it can be stated that UAE economy is getting diversified whereby non-oil sectors are starting to contribute more with time. However, due to dramatic dip in oil prices, UAE’s GDP is expected to grow at a modest pace in 2015. Even though, the inflation is below the average level but it is still reasonable to support economic growth.

Author: RKonnect
The author is the Managing Director of Research Konnection, a Dubai based market research and consulting firm that helps local and international companies to identify emerging business opportunities and successfully expand in the Gulf region. The author can be reached at waqas@researchkonnection.com
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