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UAE economy ‘resilient due to increased diversification’: WEF

The World Economic Forum (WEF) was not too critical of the UAE in its Global Competitiveness Index, despite a one place slide this year, to 17th place in a list of 137 countries.

The country, however, made gains in the Index in terms of technological adoption and business sophistication, two of the 12 pillars on which WEF gauges performance, which kept its score quite level with 2016 – actually, the UAE made a 0.04 score gain from that year.

“This improvement shows the resilience of the UAE economy, in part due to increased diversification, which is reflected in its strengthening macroeconomic environment and its ability to weather the double shock of lower oil and gas prices and reduced global trade,” the WEF said.

“Although the IMF predicts GDP growth to drop to 1.3 per cent this year, non-oil growth is expected to pick up, suggesting that the country’s diversification strategy is bearing fruit.”

Financing to get better

One of the weak areas the WEF Index identified in the UAE was access to financing (score of 17).

Specialists in trade credit insurance, surety and debt collections, Atradius, said in its MENA Country Report United Arab Emirates 2017 that with the gradual recovery of the oil price, economic confidence and appetite for investment projects have gradually improved again.

The company identified transport, tourism and construction as sectors where enthusiastic interest was showing again.

There is no doubt that increased infrastructure spending towards  Expo 2020 in Dubai will further spur economic activity and, with it, project financing for SMEs, a major target category for the event.

The report said that the situation will remain difficult in 2017 for these sectors, as domestic bank lending conditions remain tight.

But with GDP growth expected to bounce back in 2018 to 3.4 per cent, according to IMF, these conditions should change.

Inflation still a question mark

Another weak spot mentioned in the WEF index is inflation (a score of 14.4).

The Abu Dhabi Statistics Center published a report that said consumer prices witnessed a 2.2 per cent rise in the first five months of the year.

The culprits were the usual household utility hikes, such as water, power and gas, but also the price of renting a home, altogether contributing more than 50 per cent to the inflation rise.

The Consumer Price Index (CPI) in Dubai rose one per cent in the first quarter of 2017 as compared to the same period last year, according to data released by Dubai Statistics Center.

A rise in prices of goods and services by 13.73 per cent and transport by 3.71 per cent were blamed as major contributors.