Dubai: Interim data for the second half of 2017 on the UAEeconomy point to of a gradual build-up in non-oil economic momentum in 2017though headwinds remain, according to data compiled by Abu Dhabi CommercialBank’s (ADCB) Economic Research.
“A key driver is the stronger outlook forproject implementation in 2017, which will boost real investment growth. UAE’sproject awards increased by a robust 27.8 per cent quarter on quarter and 40.9per cent year on year in the third quarter. This was the highest level ofproject awards seen since the first quarter of 2014,” said Monica Malik, ChiefEconomist of ADCB.
Thanks to the strong performance in the thirdquarter, total awards in the first nine months of 2017 are up 7.6 per cent yearon year. Dubai accounted for much of the awards in the third quarter, led bythe construction sector. There was a jump in power sector awards with a $3.9billion contract to build and run a 700-megawatt solar power plant.Transportation projects also increased during the period, largely driven byroad projects around the Expo 2020 site. Around Dh10.8 billion of Expo relatedprojects have been awarded in 2017.
While the strong project awards in the thirdquarter of this year will also help to build investment momentum in 2018, theoutlook for new project awards in the fourth quarter of 2017 and the firstquarter of 2018 looks strong. The project award outlook in Dubai remainsrobust, including projects related to Expo, while there are signs of astrengthening in project awards from Abu Dhabi in the fourth quarter of 2017.This has been led by the hydrocarbon sector with ADNOC awarding two projects inNovember to increase crude output from its offshore Upper Zakum and onshore Baboilfields.
Analysts expect non-oil investments to be themain driver of UAE’s GDP growth in 2018. “We believe that gross fixed capitalformation will be the main positive driver of real non-oil GDP growth in 2018.We also expect the external trade environment to remain supportive, again ledby global developments as regional demand remains weak,” said Malik.
The higher oil price from September 2017 isexpected to boost government revenues, though the oil sector will continue tobe a drag on GDP growth in real terms with the Opec-led output cut. Non-oilexternal drivers are continuing to see healthy expansion, including trade andtourism. Jebel Ali Port’s throughput volumes saw solid growth of 5.3 per centyear on year in the third quarter.
“The data shows that the UAE is benefitingfrom the pick-up in global trade and demand whilst the Qatar situation ishaving a limited impact. Tourism numbers are continuing to benefit from earliermoves to liberalise visas for Chinese, Russians and some Indian nationals. Wealso believe that private consumption will receive a boost in the fourthquarter 2017 as households front-load some spending ahead of the introductionof VAT at the beginning of 2018,” said Thirumalai Nagesh, an economist at ADCB.
Source: Gulf News/Babu Das Augustine