United Arab Emirates Business Forecast Report Q3 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	61
ISBN Number	1744-8859
Product Code	BMI01253

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Summary

Property Market Raising Some Concerns Our outlook for the UAE remains broadly stable, with the same issues still in play. Inflation is an ongoing concern: 007 consumer price index (CPI) information is still not available from the central bank (despite a commitment to improve the timeliness of its statistical releases), but we maintain our belief that inflation reached, or even exceeded, 10.0% year-on-year (y-o-y) at end-2007. We are forecasting the same rate for 008, as rising property prices, construction costs and global food price inflation have weighed upon our earlier projections for price easing later this year.

Unlike other Middle Eastern states, however, we do not believe that inflation poses any significant risk to political stability. A wide-ranging system of subsidies and welfare provisions ensure a high standard of living for UAE citizens. The picture is not quite so rosy for expatriates, who make up the vast majority of the population - the last quarter has seen an intensification of protests by foreign labourers over pay and conditions as inflation squeezes their purchasing power and the currency peg to a weak US dollar erodes the value of remittances. These problems are present throughout the Gulf, meaning that the UAE should not struggle overly to attract foreign labour, yet the reliance on expatriates to drive key industries does raise questions regarding the quality of the Emirati education system and the country's productivity.

We are forecasting real GDP growth of 7.7% this year, easing to 6.6% in 2009 on the back of an easing in oil prices and a slight slowdown in consumer spending, due to ongoing high inflationary expectations. Growth in recent years has been largely driven by a surge in investment spending, by both the government and private companies, as illustrated by the plethora of construction projects that have sprung up across the country. Given the elevated nature of oil prices and the UAE's negative real interest rates, we are not forecasting a major slowdown in investment spending moving forward. However, we do have some concerns that inflation could make some projects unprofitable, leading developers to back out and leaving investors out of pocket.

Such a situation would harm the business environment, damaging the image that the UAE has built up with international investors, since it became the first Gulf state to allow foreign ownership of property in 2002. This, combined with ongoing labour protests and a series of major fires in Dubai in recent months (raising questions over safety measures) have all tempered our view of the construction and real estate sectors.

Content

Executive Summary
- Property Market Raising Some Concerns
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi's Political Risk Ratings
- Domestic Politics
- Facing up to Demographic Challenges
- The Growing Proportion of Expatriates in The Workforce Poses Several Challenges for The UAE's Rulers, as IT
- Strives to Maintain Its Economic Growth While Preventing Its Own Citizens from Becoming Marginalised
List of Tables
- Table: UAE Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Liquidity Story Overrides Capacity Concerns
- We Are Forecasting Real Gdp Growth of 7.7% in 2008 on The Back of The Ongoing Investment Boom
List of Tables
- Table: Economic Activity
- Debt Policy
- Corporates Driving up External Debt
- UAE Government Debt Remains Fairly Insignificant and Is More than Offset by Huge Foreign Exchange Reserves
List of Tables
- Table: Foreign Debt
- Investment Climate
- Infrastructure Boom Offers Ample Opportunities
- The Huge Range of Infrastructure and Property Developments Taking Place in The UAE Ensures Ample Investment
- and Contracting Opportunities for Foreign Firms
List of Tables
- Table: Monetary Policy
Chapter 3: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The
- World Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors
- and Global Businesses over The Coming Years
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversify through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices
- Regional Overview
- from Hidden Dragons to Final Frontiers
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for
- Its Natural Resources. Gdp Expansion in 2007 Has Been Estimated at 7.6% and We See Annual Growth Remaining
- above 7% for Our Five-Year Forecast Period
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen - Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Forecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity
Chapter 4: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
List of Tables
- Table: Bmi Business and Operational Risk Ratings
- Institutions
List of Tables
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Outlook
List of Tables
- Table: Middle East & Africa, Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations US$Mn
- Operational Risk
Chapter 5: Key Sectors
- Telecommunications
List of Tables
- Table: Telecoms Sector - Mobile - Historical Data & Forecasts
- Table: Telecoms Sector - Internet - Historical Data & Forecasts
- Defence
List of Tables
- Table: UAE Defence Sector - Defence Expenditure Historical Data & Forecasts