UAE non-oil growth slumped in 2019, early figures show

Except for the hydrocarbon industry, UAE's economy expanded at the slowest pace since at least 2011: UAE Central Bank.

    The coronavirus outbreak in China, the UAE's biggest trading partner, could further strain its economy [Bloomberg]
    The coronavirus outbreak in China, the UAE's biggest trading partner, could further strain its economy [Bloomberg]

    Economic growth in the United Arab Emirates is estimated to have accelerated last year, but mostly because of oil.

    Excluding the hydrocarbon industry, the Middle East's second-biggest economy expanded at the slowest pace since at least 2011, according to central bank forecasts released on Sunday. It grew 1.1% in 2019, compared with 1.3% a year earlier, according to the lender's latest quarterly review. Initial calculations assumed there would be an acceleration to 1.8%.

    The actual figures will be announced later this year.

    The federation of seven emirates, dominated by oil-rich Abu Dhabi and Dubai, a hub for tourism and logistics, is struggling amid geopolitical tensions over Iran and an oversupplied property market. The coronavirus outbreak in China, the U.A.E.'s biggest trading partner, could put a further strain on the economy.

    Abu Dhabi Commercial Bank, the nation's third-largest lender by market value, reduced its non-oil growth projection for this year by 0.1 percentage points to 2.3% on the back of the virus. Its forecast for the economy as a whole is 0.6%.

    The downgrade in the estimate was in large part due to the U.A.E.'s "strong global linkages," Monica Malik, chief economist at ADCB wrote in a research note.

    Dubai Skyline View

    Last month, the country's Purchasing Managers' Index, a snapshot of the non-oil private sector, fell into the contraction zone for the first time in more than a decade.

    The overall economy probably grew 2.9% in 2019, according to the central bank's preliminary figures, up from 1.7% a year earlier. The energy industry expanded 7.6%. According to data compiled by Bloomberg, the U.A.E.'s crude output rose about 3% to 3.1 million barrels a day last year.

    In Dubai, the largest city in the U.A.E., the private sector cut more jobs last month than at any point in at least the last 10 years. Lenders including Abu Dhabi Islamic Bank PJSC and First Abu Dhabi Bank PJSC have reduced their workforce and closed branches, prompting the central bank to say it's "closely" monitoring whether financial institutions are following regulations.

    Prices of housing in the U.A.E. dropped almost 5% year-on-year in December, according to data compiled by Bloomberg. That contributed to the country's inflation turning negative. Overall consumer-price growth was minus 1.4% last year.

    Prices of transportation, restaurants and hotels also stalled during the fourth quarter, according to the quarterly release.

    "The hotel sector, especially in Dubai and the U.A.E., is oversupplied," Alain Bejjani, chief executive officer of retail company Majid Al Futtaim, said in a Bloomberg TV interview on Monday. "This oversupply will continue in the coming few years."

    Still, the much-awaited World Expo 2020 starts in Dubai in October and should cause "a rise in short-term employment and higher tourism," according to Malik.

    SOURCE: Bloomberg