GCC Economic Report - December 2012
Economic indicators continue to point to the resilience of the UAE’s economy, which is expected to grow by around 3.3% over 2012 as a whole. We see growth picking up to 3.7% next year as the crisis-hit property and financial sectors continue to recover and global headwinds moderate. Looser fiscal policy will also help, but the extent of the pickup in growth will be limited by a weaker oil price.
The UAE’s federal budget for 2013 has been approved, and includes significant spending on social projects. More significantly for the consolidated budget, we expect fiscal policy in both Abu Dhabi and Dubai to remain supportive in 2013. Dubai municipality in particular has recently announced a number of upcoming infrastructure projects in line with its 2013-2015 strategic plans.
In Kuwait, a parliament that is more supportive of government objectives was elected on 1 December, which is expected to lead to greater co-operation with the new government and thereby facilitate much-needed economic reforms and implementation of the development plan. But the elections were very divisive, and may lead to escalating street protests, or potentially deeper civil unrest.
GDP is forecast to grow by 4.9% in 2012. This will be underpinned by a 5.5% rise in crude oil production and a 16% increase in government spending. In 2013, growth is projected to slow to some 3.6%. This will mainly reflect weaker oil output growth, due primarily to negligible spare capacity.
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