News Column

UAE

June 1, 2014



THE ECONOMY



The International Monetary Fund (IMF), Institute of International Finance (IIF), global credit rating agencies and a number of independent research organisations have revised upwards their growth forecasts for 2013, reflecting the improved fundamental strength of the economy. The IMF estimates that the economy grew by 4.5 per cent last year, supported by tourism, hospitality and real estate and expects it grow this year at the same pace. The UAE has substantial foreign assets, estimated at two to three times its GDP. The Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, claims the emirate can sustain a surplus as long as oil prices remain above $48 per barrel. The financial crisis pricked Dubai's property bubble and exposure of banks continues to be of concern. Dubai's successful bid for Expo 2020 is expected to further stimulate the economy, with an estimated $8 billion to be spent on infrastructure projects ahead of the exhibition. On the upside, painful inflation levels have subsided, reducing pressure on households.

POLITICS



The UAE is perceived as one of the Middle East's most politically stable countries and so far has not seen any significant civil unrest. However, a lack of transparency, high-handed government interference in business and relatively underdeveloped institutions contribute to its risk levels. The second election in the nation's history was held in September 2011 to elect an advisory council, which the federal government hopes will bring the rulers and people closer together. There is also exposure to international organised crime. Dubai's highly westernised face could make it a high-profile target for terror groups. The UAE, however, has yet to witness a major attack. It backed Saudi Arabia in blacklisting the Muslim Brotherhood as a terrorist organisation and withdrew its ambassador from Qatar earlier this year, to protest Doha's continued support for the organisation.

SOVEREIGN RATINGS



Standard & Poor's

AA (Abu Dhabi)

Stable

Moody's

Aa2

Stable

Fitch Ratings

AA (Abu Dhabi)

Stable


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Source: Gulf, The (Bahrain)


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