Increases in oil prices coupled with easier fiscal consolidation and reforms will help the UAE, the most diversified economy in the GCC, to register a higher growth of 3.8 per cent in 2018, world-leading trade credit management company said on Tuesday.
While economic diversity has made the second largest Arab economy an outperformer in the region by averting a fall into recession in the current era of lower energy prices, the UAE stands to benefit from big international events such as the Dubai Expo 2020 and the Qatar 2022 World Cup as they will spur tourist traffic to the region, analysts at Coface said as they forecast global economy to peak at 3.2 per cent in 2018.
The UAE growth projection by Coface is among the most upbeat compared to forecasts made by the International Monetary Fund and other organisations while close to the 3.9 per cent predicted by the Central Bank.
The Washington-based fund has projected UAE’s real GDP to surge to 3.4 per cent in 2018 from a 1.3 per cent in 2017. A joint report by the Institute of Chartered Accountants in England and Wales and Oxford Economics said the UAE would record 3.6 per cent growth in 2018 from 1.7 per cent in 2017.
In its annual “Country and Sector Risks Analysis 2018,” Coface said Saudi Arabia, Arab world’s largest economy, would grow at 1.2 per cent in 2018, Bahrain two per cent, Oman 3.8 per cent, and Kuwait 3.1 per cent.
“In the UAE, private consumption will likely remain among the main growth driver in 2018, sustained by household consumption and higher international tourism,” said the report.
The introduction of VAT from January 2018 is not expected to represent a significant drag on UAE’s growth. “However, subdued oil prices will likely prevent the economy from recording growth rates as high as pre-2014 levels,” it said.
With the slow recovery in oil prices since early 2017, the budget deficit will start to narrow. This is set to result in higher spending on infrastructure, construction, and investment, world’s leading credit insurer said.
Globally, Coface forecasts a growth of 3.2 per cent in 2018. In emerging countries, the recovery is expected to be stronger (with growth of 4.6% according to Coface) and above all more synchronized. In advanced countries, the downward trend in insolvencies continues but is beginning to run out of steam (the forecast decline is only 1.8 per cent in 2018, after a six per cent drop in 2017) as many countries have already returned to their pre-crisis levels.
In 2018, the upturn is expected to continue but corporates risk is overheating. Having begun with the threat of protectionism and punctuated by numerous elections and political crises, 2017 held some pleasant economic surprises. Only thirteen countries ended the year in recession, compared with twenty-five in 2016, Coface said.
Global trade made a spectacular leap, growing 4.4 per cent in after 1.5 per cent in 2016, while the risks associated with protectionism did not materialize: the net number of protectionist measures worldwide reached 283 in 2017 (against 374 in 2016), despite increasing in the United States. Business was stronger than expected in the United States, Europe and several emerging countries where it was supported by the gradual rise in price of several commodities.