Oil revival lifts Abu Dhabi 2010 nominal GDP to 16%

Reuters/Abu Dhabi/Dubai

UAE Economy Minister Sultan bin Saeed al-Mansouri reiterated yesterday his June 3%-3.5% forecast for the country’s GDP growth

Abu Dhabi’s nominal economic output rose 15.9% in 2010, after shrinking nearly a quarter in the previous year, helped by recovery in its key hydrocarbon sector, the Gulf Arab emirate’s preliminary data showed yesterday. The UAE, which sits on 10% of global oil reserves and accounts for 90% of UAE oil output, felt the pinch of the global financial crisis in 2009 after crude prices tumbled from 2008 record highs. With an oil price recovery in 2010, the crude-reliant Abu Dhabi economy picked up speed again to see its nominal gross domestic product rise to 620.3bn dirhams ($169bn), Abu Dhabi Statistics Centre’s (SCAD) yearbook showed. However, Abu Dhabi’s GDP, which makes up 57% of the UAE economy, is still below the 705.2bn dirhams seen in the oil and property-boom year of 2008. “High oil prices and government stimulus spending should ensure relatively strong nominal GDP growth for 2011, alongside the ‘safe haven’ effect from the first quarter,” said Liz Martins, senior Mena economist at HSBC in Dubai. “However, our PMI survey suggests that momentum may be on the wane in the private sector.” The statistics office did not release real GDP data for Abu Dhabi, whose performance had suffered from last year’s debt troubles in neighbouring trade and business hub Dubai. The UAE, the second-largest Arab economy and the world’s No 4 oil exporter, booked real GDP growth of 1.4% in 2010 after a 1.6% contraction in the previous year. UAE Economy Minister Sultan bin Saeed al-Mansouri reiterated yesterday his June 3%-3.5% forecast for the country’s GDP growth, saying the outcome depended on oil price moves and that the risk of another global recession was a worry. Analysts polled by Reuters in June expected UAE economic output to expand by 3.7% in 2011 with sluggish bank lending and weak property sector seen as the main drags. However, growth in UAE non-oil business activity plunged to a 15-month low in August, signalling a worsening in global conditions. Brent crude prices have been floating between $92 and $127 per barrel this year.Al-Mansouri also said that there was no need to further boost government spending—a key tool to steer the UAE economy with the dirham currency pegged to the US dollar. “There is no need to boost fiscal spending. In the UAE, we have spent a lot on infrastructure and these investments are going on,” he told reporters on the sidelines of a financial forum in the capital Abu Dhabi. Most of the UAE fiscal spending occurs at the level of individual emirates, mainly in Abu Dhabi, which accounts for about 71% of the total. Abu Dhabi spent 245.5bn dirhams in 2010, according to the IMF. Its 2011 budget figures are not available. The UAE has pledged to spend heavily on social measures, including $1.6bn in less-developed northern emirates. In Abu Dhabi, hydrocarbon sector output grew by 28.9% at current prices in 2010, contributing to nearly half of the emirate’s GDP, after a 42.1% slump in 2009. Per-capita income in Abu Dhabi, home to nearly 2mn people, rose to 315,300 dirhams ($85,800) in 2010, one of the highest in the world, from 293,100 in the previous year. Exports of crude, gas and oil products surged 41.4% to 278.1bn dirhams last year. They account for more than 92% of total exports and 45% of Abu Dhabi’s GDP. The UAE, along with some other Opec members such as Saudi Arabia, increased its oil output this year to compensate for a production drop in strife-torn Libya. Abu Dhabi, which plans to trim its dependence on oil by investing billions of dollars in industry, tourism and infrastructure, produced an average 2.255mn bpd last year, up from 2.189mn in 2009.UAE aims to up industrial sector contribution to GDP to 25%The UAE plans to increase to 25% the contribution of the industrial sector to real gross domestic product over the coming few years, as part of the country’s 2021 vision to shift its economy away from oil dependency, the UAE’s economy minister said yesterday. “The UAE is currently working on increasing the contribution of the industry sector to 25% of its real GDP, up from 16.2% in 2010, during the next few years,” Sultan bin Saeed al-Mansouri said. He added that the country is attempting to attract large investments towards the industrial sector as well as helping small and medium enterprises as part of UAE’s plan to diversify its economy. Some of the incentives provided to the industrial sector include customs exemptions with 3000 having been granted during the first half of 2011. Revenue for the UAE from 1605 new and renewed licences within the industrial sector reached 4.5bn UAE dirhams ($1.25bn) during the first six months of 2011, according to a bi-annual 2011 economic report. No comparative numbers were provided.