Dubai’s economy to cushion UAE’s diminishing oil reserves

Dubai’s impressive diversification programme, including the expanding tourism and commercial infrastructure, and Abu Dhabi’s hydrocarbon wealth are fuelling growth and helping the UAE prepare for the future restrain in oil prices and the “gradual depletion of domestic hydrocarbon reserves”.

The London-based Business Monitor International (BMI), a leading print and online publisher of specialist business information on global emerging markets, said in a report: “Our bullish outlook is based on the fact that the United Arab Emirates will continue to be a primary beneficiary of the ongoing hydrocarbons price boom for some time yet.”
It described as “less promising” the proposed UAE-US free trade agreement, but expressed optimism on the lengthy FTA negotiations between the European Union and the six-member Gulf Cooperation Council (GCC), a regional bloc and free trade zone. “Success on the EU front would boost the UAE business environment, partly by facilitating ongoing diversification away from the hydrocarbons sector,” it said.

Entitled “The UAE Business Forecast Report: Q4 2007″, the study, which includes five-year forecasts to end-2011, said that while it is upbeat on the UAE’s increasing trade re-exports, it also sees the rising cost of living in key emirates and the perceived real estate-induced economic volatility as potential risks. “We continue to expect robust economic growth in 2007 and beyond, with stubborn inflation and a projected moderate decline in oil prices presenting only mild risks,” BMI said in a 52-page report. “Indeed, thanks to a concerted diversification programme, the UAE is fairly well-insulated from oil price volatility, relative to other regional states…”

But it noted that the oil and gas sector accounted for 37 per cent of nominal gross domestic product of Dh574.85 billion last year compared to the 35.7 per cent of nominal GDP in 2005. Preliminary data released by the UAE Ministry of Economy show a Dh599-billion nominal GDP in 2006.

Khaleej Times