The UAE economy will grow by 3.5 percent this year, according to credit insurance giant Euler Hermes, on the back of infrastructure development and improved business climate.
The forecast, published on Monday, is higher than that of the 3.1 percent growth predicted by the International Monetary Fund, but lower than the 3.9 percent recorded last year.
Analysis by Euler Hermes said that economic growth across the GCC was anticipated to slow during 2013 and 2014 to 4 percent and 4.3 percent, respectively. In 2011 and 2012, the six-nation bloc posted 7.2 percent and 6 percent increases, respectively.
The UAE and Saudi Arabia are by far the two largest contributors to the region’s overall GDP.
Euler Hermes said any slowdown growth could be partly attributed to an expected oil production decline this year, partly driven by lower US demand due to the development of shale gas and slowing growth in China.
The report cited pro-active policies to support growth in Saudi Arabia, including the kingdom’s five-year plan to develop and improve infrastructure, as well as invest in human capital. Diversification of local economies will also boost growth, Euler Hermes said, with Saudi’s share related to oil in total GDP falling from 34 percent in 2000 to 21 percent in 2012. In the UAE this is down from 47 percent to 33 percent in the same time period.
In terms of short-term risks the report highlighted the deteriorating geopolitical situation, most notably the Syrian conflict, moderation of emerging markets demand and sliding oil prices. In the medium-term, economic diversification should make GCC economies less susceptible to external shocks, Euler Hermes said.
The company said the world economy would grow 2.2 percent this year, down 0.5 percent from prior forecasts, due to contractions in the Eurozone.