Kamko uae outlook april2011

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UAE Construction Outlook April2011

Transcript of Kamko uae outlook april2011

  • 1. M+965 185 26 26+965 2244 5918 Research United Arab Emirates (UAE) Economic Brief and Outlook 2011 April 2011

2. KAMCO Research UAE Economic Brief and Outlook 2011Table of ContentsPageUAE Economic Outlook 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6Gross Domestic Product (GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13Oil vs. Non-Oil GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8GDP by Type of Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9GDP Components by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Financial Services Sector Contribution to GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10UAE GDP by Emirates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-12Main Non-Oil Sectors Contribution to GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-13Public Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-17Revenues, Expenditures & Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Balance of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-16Foreign Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Monetary Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19Ination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Money Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19UAE Real Estate Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-20The UAE Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-24Credit Facilities Allocation by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21Banks Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-22Real Estate Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Banks Deposits Snapshot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Loan to Deposit Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23UAE Banks Loan Loss Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-24UAE Creditworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-25Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26KAMCO Investment Research DepartmentM2, Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq, P.O. BOX : 28873, Safat 13149, Kuwait Tel : +(965) 1 852 626 or (965) 2233 6600, Fax : +(965) 2249 2395Email: Kamco_research@kamconline.com Website: http//www.kamconline.com 3. KAMCO ResearchUAE Economic Brief and Outlook 2011UAE Economic Outlook 2011The economic recovery in the UAE is gaining strength, supported by a favorableglobal environment but subject to increased regional political uncertainty coupledwith a slowdown in the real estate sectorUnderpinned by its wealth in oil, the UAEs economy has recorded an overall steady level of growth over theyears and the value of GDP has more than doubled from AED 387.8 billion (USD 105.6 billion) in 2004 toAED 934.3 billion (USD 254.4 billion) in 2008. Non-oil GDP in recent years, however, has been a main driverof growth, accounting for an average of 65% of GDP from 2004 to 2008. Major non-oil sectors in theeconomy in 2008 include: Trade (16%), Manufacturing (12%), Real Estate (8%), Construction (7%), and theFinancial Sector (7%). Although Abu Dhabi and Dubai contribute the most to the countrys GDP at 56% and32% respectively in 2008, the latter has played a greater role in the growth witnessed among the majority ofnon-oil sectors. Additionally, in line with the effects the global financial crisis had on countries around theglobe; the UAE wasnt able to entirely avoid the crisis in the latter part of 2008 and 2009 as evidenced by the2% contraction witnessed in its 2009 GDP, which stood at AED 914.3 billion (USD 248.9 billion).Nonetheless, the UAEs situation remains better than other countries.As a result, growth prospects in the UAE over the coming years will undoubtedly be shaped by the pace ofthe global economic recovery and the slowdown within the real estate sector - particularly in Dubai. Despitehaving short-term growth depend largely on how much economic activity expands, prospects for the long-term health and stability of the economy will depend on the progression of Abu Dhabis Economic Vision of2030 and Dubais Strategic Plan of 2015. Growth trends differ across Emirates as higher oil production andincreased infrastructure spending are the main drivers of growth in Abu Dhabi. On the other hand, Dubai isbenefiting from its leading position as a regional trade hub, with growing links to Asia, and improvedcompetitiveness.Estimates for 2009 by the UAE National Bureau of Statistics reveal that the UAEs contraction in nominalGDP was led by the drop in the oil sector, which slumped 22% in 2009 to reach AED 267 billion (USD 72.7billion) on the back of a drop in oil prices. However, non-oil GDP rose 10%, albeit at a slower pace than 2008,to reach AED 647.3 billion (USD 176.2 billion) in 2009. Thereby leading non-oil GDP to contribute a hefty71% of the UAEs GDP - a considerable jump from the 63% contribution it registered in 2008.Additionally, with average oil prices ending 2010 at USD 77 pb, 18% higher than 2009s average oil price ofUSD 60 pb, growth in the oil & gas sector is set to rebound, yet the recovery will be limited due to OPECconstraints on crude oil production. As a result, the expected increase in the oil & gas sector will help driveGDP growth in the short-term horizon, as well as the governments expansionary fiscal policies as they willensure expansion in the non-oil sectors; thus enabling the UAE to deliver towards its diversification strategygoals. It is the governments redirection of hydrocarbon revenues towards the development of key industriesover the long run that will enhance the Emirates economy and enable it to compete with emerging markets.According to the IMF, real economic growth in U.A.E. is expected to remain unchanged in 2011 at 3.25% andnon-oil GDP growth is forecasted to grow from 2% in 2010 to 3.25% in 2011; reflective of strong tourism,logistics, and trad