Sultan Al Mansouri, the Minister of Economy, said on Wednesday that government expectations for growth in the UAE in 2015 have fallen to 3 per cent.
That is a significant cut to the government’s outlook, as the impact of the falling oil price, and a worsening global outlook, is recorded in official data.
Speaking to a student delegation from the National Defence College, the minister on Wednesday gave “a comprehensive overview of the national economy”.
Mr Al Mansouri predicted in January last year that the UAE’s economy would grow by 4.5 per cent, before revising his estimate to 3.5 per cent in October.
The UAE’s economy has been hit by low oil prices, a slowdown in government spending, falling real estate prices in Dubai, lower global trade volumes, and the spectre of a Chinese crash.
The fall in the oil price has led the IMF to cut the country’s growth forecast twice since its October 2014 projection of 3.8 per cent. In July 2015, the fund said it expected 3.5 per cent growth. It now expects 3.1 per cent growth in the country.
Informal measures of economic growth have also shown that the UAE’s economy is slowing. The UAE purchasing managers index, a monthly survey of businesses in the country, saw economic activity slow to its lowest level since 2011, when the UAE began to emerge from the aftermath of the 2009 property crash.
The Economic Composite Indicator, a measure developed by the UAE’s central bank to approximate changes in GDP, suggests that the country’s economic performance in the first three quarters of last year was its worst since 2010.
According to the minister, despite the fall in oil prices “the UAE Government remains positive about the country’s economic outlook” and diversification policies have “helped neutralise” their impact, demonstrated by “the nation’s zero-deficit 2016 budget”.
Meanwhile, the global economic picture is growing more gloomy, analysts say.
Oil prices continue to fall, scraping new 11-year lows. Banks are offering their latest predictions of the depths to which the commodity will fall: Standard Chartered says Brent crude could hit $10 per barrel, as the production glut continues. Goldman Sachs and Morgan Stanley say $20.
A second Chinese stock market rout has hit global equities, and has set analysts to worrying about contagion from the world’s second-largest economy.
Slower growth in China has already hurt global commodity prices, but analysts fear that the country’s massive debt pile could become unsustainable if the economy stops growing, with unknowable consequences for global growth.
“Sell everything”, a credit note from the UK-based Royal Bank of Scotland advised its readers on Tuesday. “This is about return of capital, not return on capital. In a crowded hall, exit doors are small … this all looks similar to 2008.”
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