Driven by robust government spending for Expo 2020 Dubai-related infrastructure projects coupled with some deregulation in the private sector that supports foreign investment activity, the UAE economy is projected to accelerate this year, economists said.
"That said, Opec production cuts, weaker global growth and volatile oil prices pose downside risks to the outlook," said FocusEconomics panelists led by Mena lead economist Ricard Torne. They expect the UAE's gross domestic product to increase 2.3 per cent in 2019, which is unchanged from last month's forecast, and 2.9 per cent in 2020.
Consumer prices in the UAE, on an annual basis, fell 1.5 per cent in June. This was a stronger drop than May's 1.1 per cent fall. "A weak real estate market and a base effect should limit upward price pressures going forward."
Economists project consumer prices to decline 0.9 per cent in 2019, which is down 0.1 percentage points from last month's forecast. The panel expects inflation to return and average 1.4 per cent in 2020.
The UAE's economic growth was strong in the second quarter, as oil production expanded robustly in year-on-year terms - despite ongoing Opec output cuts - which bodes well for the energy sector.
The non-energy sector was also likely solid, as the PMI averaged higher in the second quarter compared to the first quarter.
"This comes hot on the heels of a healthy first quarter, with increased oil output driving the energy sector and vigorous credit growth powering the private sector."
"In the third quarter, the tapering of the purchasing managers index in July suggests growth will likely lose some steam. On the upside, oil output remained robust in the same month, reflecting maintenance works last year," the FocusEconomics report said.
Cedric Lizin, head of UBS Wealth Management Dubai, said a recent survey showed clearly that investors in the UAE are among the world's most optimistic when it comes to their local economy. "However, we believe it is now important to translate that optimism into actual market participation, as opposed to cash holdings."
In the UAE, 84 per cent of high net worth individuals and business owners take an optimistic stance on the state of the economy, almost unchanged compared to last quarter's results, according to UBS Global Wealth Management's new quarterly Investor Sentiment survey.
Source: Khaleej Times - firstname.lastname@example.org
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