Country Report United Arab Emirates September 2017

Country Report United Arab Emirates September 2017

  • September 2017 •
  • Report ID: 2358817 •
  • Format: PDF

Outlook for 2017-21



  • We expect the UAE to remain stable. Given the poor health of the emir of Abu Dhabi, Sheikh Khalifa bin Zayed al-Nahyan, a succession to Sheikh Mohammed bin Zayed al-Nahyan is possible before 2021, but will be smooth.
  • The UAE will retain its assertive foreign policy, including military involvement in Yemen and Syria. The dispute with Qatar will have a modest direct impact on the UAE but will damage commercial links and affect regional relations.
  • OPEC-mandated oil production cuts, which have been extended to early 2018, and the stagnation of oil prices at a modest level will keep the fiscal position in deficit throughout 2017-21, despite new revenue-raising measures.
  • The federal authorities and individual emirates, particularly Abu Dhabi, will prioritise further diversification away from their reliance on hydrocarbons, with government investment efforts focused on non-oil sectors.
  • An extended period of reduced oil output and limited liquidity growth, which will constrain non-oil demand, will keep growth modest in 2017, with a slightly stronger recovery thereafter, averaging 3.2% in 2018-21.
  • Export earnings will recover from 2017 and the current account will remain in surplus throughout the forecast period, albeit only just in 2019-21.


Review



  • Tensions are rising between the UAE and the Yemeni government, to which the UAE is allied in Yemen's civil war, given misgivings about the Yemeni president and his relations with Islah, a Yemeni affiliate of the Muslim Brotherhood.
  • Abu Dhabi's crown prince, Sheikh Mohammed bin Zayed, hosted a leading Iraqi Shia Islamist, Moqtada al-Sadr, as part of an effort to increase Gulf influence in Iraq.
  • The Abu Dhabi National Oil Company (ADNOC) has announced a new strategy, involving expanding its partnerships and spinning off its services businesses.
  • The Federal Tax Authority estimates that the introduction of value-added tax (VAT) and excise taxes will boost consumer prices about around 1.4 percentage points (in 2018).
  • The UAE's purchasing managers' index (PMI) rose slightly, to 56, in July, well above the expansionary threshold of 50, indicating robust non-oil performance, particularly in Dubai.
  • Real-estate transactions in Dubai were up by 17% year on year in value terms in the first half of the year, at US$36bn, indicating a resurgence in this key sector.


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