United Arab Emirates Business Forecast Report Q2 2009

Publication Date	February 2009
Publisher	Business Monitor
Product Type	Report
Pages	72
ISBN Number	not applicable
Product Code	BMI03426

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Summary

Growth Outlook Deteriorates As we have been saying for some time, the UAE will not escape the impact of the global economic slowdown. The country's large oil, trade and banking industries are all vulnerable to external factors, and will experience far slower growth this year than they did in 2007 or 2008. Domestically, the effects of the credit crunch are being keenly felt, putting a break on project finance, while job losses and tighter restrictions on mortgage lending are contributing to continued negative sentiment surrounding the property market.

All eyes in the Middle East are on Gaza, and the massive reconstruction effort required to rebuild the shattered territory following the war with Israel. The UAE has been quick to pledge money and organise fund-raising events, a move that appears to have widespread public support. However, we do not see this as the beginning of a more interventionist role for the UAE in regional politics.

The country has traditionally maintained strong economic relations with most Middle Eastern states, even those that do not get along with each other, as well as being a strong ally of the US.

It is unlikely to jeopardise these by adopting any strong punitive measures against Israeli or US interests in the region.

We have lowered our real GDP forecast for the UAE to just 1.0% in 2009 on the back of a deteriorating global climate and the stream of bad news emanating from the country itself. There are three key areas of risk; real estate - prices are falling and a slew of high profile construction projects have been cancelled or postponed indefinitely; trade - global trade and shipping volumes are dropping, which bodes badly for revenues at UAE ports and for the country's re-export trade; oil prices - we have slashed our average 2009 price forecast to US$46.50/bbl for the OPEC Basket, down from US$94.07/bbl in 2008. Any further downward revision would push the UAE federal budget into deficit in 2009.

Although the business outlook is far from positive, there is a silver lining. In a bid to boost growth, individual Emirates are pouring money into infrastructure development, with a strong focus on utilities and transport. Given that the UAE's infrastructure has been straining to keep up with the rapid growth in real estate development, the coming years could allow the former to catch up, thereby strengthening the country's business environment in the long term.

Content

Executive Summary
- Growth Outlook Deteriorates
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Foreign Policy
- Gaza At Forefront, But Diplomacy To Remain Low-Key
- While the government has been quick to offer aid to conflict-stricken Gaza, a complex set of diplomatic and
- trading relations mean that the UAE has usually played a low-key role in regional politics
- TABLE: Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Growth Outlook Weakening
- We believe that the UAE will avoid an economic contraction in 2009, but only just
- TABLE: ECONOMIC ACTIVITY
- Balance of Payments
- Current Account Surplus Sliding Out Of View
- After a bumper year in 2008, the UAEs current account surplus will be all but wiped out in 2009
- TABLE: BALANCE OF PAYMENTS
- Debt Policy
- Could The Dubai Debt Bubble Burst?
- The UAEs external debt levels are broadly sustainable, in light of its ample reserves
- Regional Monetary Policy
- GCC Single Currency: Still Sceptical
- TABLE: EXCHANGE RATE POLICY
Chapter 3: 10-Year Forecast
- The UAE Economy To 2018
- Short-term Weakness, But Recovery Should Be Quick
- Growth will recover fairly quickly from 2009s slump, averaging 4.4% between 2009 and 2018
- TABLE: Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
- China
- A Seismic Upheaval In 2009?
- One of the biggest and least discussed wild cards that could rear its head in 2009 is dramatic political
- upheaval in China
- United States
- Europe
- Big Trouble For European Banks In 2009
- The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will
- combine to spell trouble for the financial services sector in 2009
- TABLE: Banks Leverage Ratios
- TABLE: Assets As % of Home Country GDP
- TABLE: Assets As % of Home Country GDP When Euro zone Is Considered Home Country
- TABLE: Exposure As % of Total Exposure To Region
- TABLE: Banks Foreign Exposure (US$ mn)
- TABLE: Exposure As % of National GDP
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- Market Outlook
- TABLE: MIDDLE EAST & AFRICA ANNUAL FDI INFLOWS
- TABLE: BMI TRADE RATINGS
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: Key Sectors
- IT
Executive Summary
- Spending should continue to be strong in traditional sectors such as government, financial, and oil and gas
- verticals
- TABLE: UAES IT HISTORIC DATA & FORECASTS
- Power
Executive Summary
- The UAE is still ranked first, now two points ahead of Egypt, in BMIs updated Power Business Environment
- rating, thanks largely to its developed competitive landscape, privatisation progress, population and power
- consumption growth
- TABLE: UAE POWER HISTORIC DATA & FORECASTS
Chapter 7: BMI Global Assumptions
- Global
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: GLOBAL AND REGIONAL REAL GDP GROWTH, % chg y-o-y
- Economic Activity
- Monetary Policy
- TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
- TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- Commodities
- TABLE: EMERGING MARKET EXCHANGE RATES