Is the Dubai economy turning the corner?

As the 2020 Expo approaches, the Dubai economy is showing signs of rebounding. (AP)
Updated 21 June 2018
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Is the Dubai economy turning the corner?

  • Expo 2020 expected to boost GDP
  • Relaxation of residency rules helps real estate

LONDON: Is the Dubai economy finally turning the corner? At least one major international bank thinks so.

It follows a move by the emirate's leadership to reboot an economy that has been hit hard by corporate job losses, the introduction of VAT and a slowing real estate sector.

The UAE’s non-oil economy is likely to “turn a corner” next year with Dubai’s Expo 2020 infrastructure projects, changes to visa rules and increased government spending set to boost growth, according to a Bank of America Merrill Lynch (BofAML) research note.

Abu Dhabi National Oil Company’s (ADNOC) downstream expansion plans are also expected to drive the country’s non-oil GDP growth, said the note compiled by Middle East and North Africa (MENA) economist Jean Michel Saliba.

The Gulf country’s real GDP growth is estimated to rise to 3.5 percent in 2019 from a forecast 2.8 percent increase this year and a 1.9 percent increase in 2017, said the note published on Thursday.

Buoyed by a recovery in oil prices, Abu Dhabi approved a 50 billion dirham ($13.6 billion) three-year stimulus package in early June, which BofAML estimated could add 0.4 percentage points to non-oil GDP growth.

ADNOC’s $45 billion five-year downstream investment plan — revealed in May — is estimated to add a further 1.1 percentage point to the emirate’s non-oil growth, the report said.

The Expo 2020 event in Dubai could drive up GDP growth by 2 percentage points between 2020 and 2021, the report said, by boosting job creation, consumption and tourist numbers.

Given the improvement in oil prices, the cost of Abu Dhabi’s stimulus spending is considered “financeable” by BofAML, while Dubai’s spending plans are said to be “modest.”

Recent structural reforms, including plans to introduce long-term expatriate visas for up to 10 years, could help to boost the UAE’s population and consumer demand, the note said.

“The new UAE long-term and temporary visa system should facilitate retention of white-collar expatriates,” it said.

“As we expect longer-term visas not to be linked to continued employment, this may increase expatriate incentives to acquire property and support real estate demand.”

The UAE announced in May that it would allow 100 percent foreign ownership of UAE companies in specific industries by the end of the year, a move that could give a welcome boost to foreign direct investment in the country.

A new UAE-wide insurance scheme may provide a one-time boost to corporate profits, the note said.

The UAE cabinet approved plans in June for the insurance scheme to replace the previous system whereby employers had to provide a monetary guarantee to cover each of their workforce.

The move is likely to free up capital that companies could choose to sit on or to reinvest, BofAML said.

“Should corporates invest, we estimate this could lead to a one-off 0.1percentage point boost to UAE non-hydrocarbon real GDP growth,” the report said.


G-20 calls for more dialogue on rising trade tensions

Handout photo released by the G20 Press Office showing the Governor of the Bank of England Mark Carney on a screen as he speaks during a meeting on digital technology as a key to financial inclusion, on the second day of the G20 meeting of Finance Ministers and Central Bank Governors, in Buenos Aires, on July 22, 2018. (AFP)
Updated 23 July 2018
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G-20 calls for more dialogue on rising trade tensions

  • The Group of 20 nations is composed of traditional economic powers such as the United States, Japan and Germany and emerging nations such as China, Brazil, India and Argentina
  • Trade tensions remain high and they threaten to escalate further

BUENOS AIRES, Argentina: The world’s top financial officials called Sunday for more dialogue on trade disputes that threaten global economic growth, with one warning that differences remain and tensions could escalate further.
The two-day meeting of finance ministers and central bankers from the Group of 20 nations came as the United States clashes with China and other nations over trade, with the nations imposing tariffs on billions of dollars of the other’s goods.
A final communique said that although the global economy remains strong, growth is becoming “less synchronized” and risks over the short and medium terms have increased.
“These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies,” the communique said. “We ... recognize the need to step up dialogue and actions to mitigate risks and enhance confidence.”
On Friday, President Donald Trump renewed his threat to ultimately slap tariffs on a total of $500 billion of imports from China — roughly equal to all the goods Beijing ships annually to the US The White House has also itemized $200 billion of additional Chinese imports that it said may be subject to tariffs.
The US has also imposed tariffs of 25 percent on steel and 10 percent on aluminum, including from Europe. China, the European Union, Canada, Mexico and Turkey have counterpunched with taxes on US goods. EU tariffs on American products include Harley-Davidson motorcycles, cranberries, peanut butter, playing cards and whiskey.
EU financial affairs commissioner Pierre Moscovici warned that such disputes are a threat.
“Protectionism, I want to insist on that, is good for no one,” Moscovici told reporters. “Trade wars are not easy ... they create no winners, only casualties.”
US Treasury Secretary Steven Mnuchin disputed that protectionism is the issue.
“People are trying to make this about the United States and protectionism. That’s not the case at all,” he said at a news conference. “This is about the United States wanting fair and free trade. ... We very much support the idea that trade is important for the global economy, but it’s got to be on fair and reciprocal terms.”
Mnuchin said there had been no “substantive discussions” with China about trade during the meeting. Asked what it would take to re-start talks with the Asian giant, he said, “Anytime that they want to sit down and negotiate meaningful changes, I and our team are available.”
As the gathering wound up, Moscovici said differences of position remain despite talks.
“These meetings have been taking place in an international context which is very challenging. ... Trade tensions remain high and they threaten to escalate further,” he said.
Christine Lagarde, managing director of the International Monetary Fund, has warned that a wave of tariffs could significantly harm the global economy, lowering growth by about 0.5 percent “in the worst-case scenario.”
Mnuchin disagreed Sunday, saying that overall, the US economy has not been harmed by the trade battles set off by Trump’s get-tough policies. He acknowledged, however, that some individual sectors have been hurt and said US officials are looking at ways to help them.
“We see some micro impacts where people, our counterparts, are targeting very, very specific items, in very specific communities,” he said. “But from a macro standpoint, we do not yet see any significant impact on the economy.”
So far, global markets have remained generally calm despite the US-China trade war and the other trade conflicts.
But analysts say they expect Trump will impose more tariffs on China and potentially other key US trading partners. With those nations almost certain to retaliate, the result could be higher prices for Americans, diminished export sales and a weaker US economy by next year, they say.
Moscovici said the G-20 meeting had not been tense. He said that countries must remain “cool-headed and maintain a proper sense of perspective” and that the EU remains open to dialogue.
“That’s why EU President Jean-Claude Juncker and EU Trade Commissioner Cecilia Malmstrom will meet with Trump” in Washington next week, he said. “We hope this meeting will be productive and successful.”
Mnuchin said that the US looks forward to those discussions.
The Group of 20 nations is composed of traditional economic powers such as the United States, Japan and Germany and emerging nations such as China, Brazil, India and Argentina.
Officials in Buenos Aires also discussed issues including the future of work and infrastructure for development, the international tax system and financial inclusion. It is the third of five meetings by finance ministers and central bankers scheduled in advance of a meeting of G-20 national leaders in Argentina to be held Nov. 30-Dec 1. Mnuchin said Trump plans to attend.