UAE economy grew three per cent in 2016: Emirates NBD
Provisional data released by the Federal Competitiveness and Statistics Authority shows that the UAE economy grew three per cent in real terms last year, exactly in line with our forecast and slower than the 3.8 per cent growth recorded in 2015.
Mining & quarrying, which includes crude oil and gas extraction, expanded 3.8 per cent in 2016, while the non-oil sectors grew 2.7 per cent. The slowdown in non-oil growth last year (from 3.2 per cent in 2015) is consistent with the UAE PMI survey data.
UAE GDP growth
The fastest growing non-oil sector (and the biggest contributor to overall growth last year) was transport & storage which expanded 7.4 per cent y/y, up from 5.7 per cent in 2015. Manufacturing and construction were the other key drivers of the UAE’s growth last year, up 6.0 per cent y/y and three per cent y/y respectively. The wholesale & retail trade sector, which alone accounts for more than 10 per cent of GDP, expanded just 0.5 per cent in real terms in 2016, although this was an improvement from 2015.
Key non-oil sector real growth rates
Accommodation and food services grew 5.7 per cent in 2016, after remaining flat in 2015, confirming a recovery in the travel, tourism and hospitality sectors last year. This is consistent with what we have seen from survey data such as the Emirates NBD Dubai Economy Tracker travel & tourism index. Only two sectors contracted in 2016: financial & insurance activities (-2.7 per cent y/y) and public administration, defence & social security (-0.3 per cent y/y), as private sector credit growth slowed and the government curbed spending on the back of lower oil revenues.
2017 UAE growth forecast revised lower on OPEC cuts The UAE has the most diversified economy in the GCC with just under a third of real GDP coming from the hydrocarbons sector. The OPEC agreement in November 2016 set a production target for the UAE of 2.874mn bpd for H1 2016. However, the UAE’s oil output was higher than this level from January through April and only reached the quota level last month, according to Bloomberg estimates. We had expected the UAE to boost oil production in H2 2017, once the curbs were lifted, as the authorities had long maintained an objective to boost oil production to 3.5mn bpd by 2020. As a result, we had forecast an overall expansion in the oil sector of the UAE for the full year 2017.
However, OPEC’s decision in May to extend production curbs through March 2018 has meant that the UAE’s crude output, if it remains compliant for the rest of the year, will decline -2 per cent y/y in 2017. Consequently, we have revised down our 2017 UAE real GDP growth forecast to 2.0 per cent from 3.4 per cent previously. Our expectation for a rebound in the non-oil sectors this year remains unchanged.