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United Arab Emirates Country Risk Report Q2 2016

United Arab Emirates Country Risk Report Q2 2016

Core Views Lower oil prices will hit growth as government spending and consumer confidence falls. We forecast real GDP growth at 2.8% and 2.6% in 2016 and 2017 from an estimated 4.0% in 2015 We expect Dubai to outperform Abu Dhabi, with the former benefitting from increased activity in the trade and tourism sectors, as well as lower exposure to oil prices. Credit growth to the private sector will remain relatively slow through 2016 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth Slowing, But Non-Oil Sector To Outperform
The UAE's economic growth will slow over the coming quarters given lower oil prices, and the resultant cutback in government and
private spending. The non-oil sector will become the major growth driver.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Deficits To Force Spending Cutbacks
The UAE will remain in a fiscal deficit until 2021; however, it easily has enough financial firepower to withstand an era of lower oil prices.
Lower oil revenues will force further fiscal consolidation and revenue-raising measures, most notably the introduction of VAT in 2018.
Overall, we forecast a fiscal deficit of 6.1% of GDP in 2016, from a surplus of 4.8% of GDP in 2014.
Abu Dhabi Economic Outlook
Structural Slowdown In Place
Abu Dhabi's economy will undergo a structural slowdown in the coming quarters, primarily on the back of lower oil prices. The non-oil
sector will become the key growth driver, with construction the outperformer.
TABLE: ABU DHABI – GDP FORECAST
Dubai Economic Outlook
Growth To Slow As Regional Slowdown Takes Its Toll
Dubai's economy will slow over the coming quarters as the impact of lower oil prices takes effect through reduced consumer confidence
and fiscal tightening on a federal level. In addition, the slowdown elsewhere in the region, particularly Saudi Arabia, will have a knock-on
impact on Dubai's real estate and retail segments.
TABLE: DUBAI – GDP FORECAST
Chapter 2: 10-Year Forecast
The UAE Economy To 2025
Greater Caution, Slower Growth
After its recent experience of boom and bust, we are forecasting a slower but more sustainable growth trajectory for the UAE over the
next five to 10 years. Consumer spending will remain the key driver of GDP.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
UAE: Caught Between Two Hegemons
The UAE will continue to pursue a careful balancing act between Iran and Saudi Arabia; while trying to stay within the GCC's political
zone of influence, it will at the same time keep Iran on side, benefiting from its reintegration into the global market.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Stable Outlook But Challenges Remain
The UAE is one of the more stable Gulf states over the long term, with a small, wealthy population, no history of terrorism and no
sectarian tensions to speak of. That said, it is not without its challenges.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: MIDDLE EAST AND NORTH AFRICA – TRADE PROCEDURES AND GOVERNANCE RISK
TABLE: BREAKDOWN OF IMPORT AND EXPORT PROCEDURES AND COSTS
TABLE: DOCUMENTS REQUIRED FOR IMPORTING AND EXPORTING
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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