On the economic level, the estimated real GDP growth, revised downwards by the International Monetary Fund (IMF), stands at 3% in 2015, significantly lower than the 4.57% recorded in 2014. This goes in line with the 45% fall in international oil prices since June 2014, noting that about 60% of the UAE government revenues were generated from the oil and gas sector in 2014. In another context, the UAE’s Purchasing Managers’ Index (PMI), which illustrated the performance of the non-oil producing private sector, declined from 57.6 in September 2014 to 56.0 in September 2015, yet still indicative of solid business expansion. The decline in the PMI is mainly attributed to new export levels falling for first time since May 2010 and jobs’ growth easing to a six-month low. Looking at the average inflation for the two largest Emirates by August 2015, Consumer Price Index (CPI) in Abu Dhabi added 6.12% y-o-y to 137.24 while Dubai’s CPI increased by 4.41% y-o-y to 126.02. In Abu Dhabi and Dubai, the main rise in prices was in “Housing and utility costs”, “Furniture and Household Goods”, “Education”, and “Restaurant and Hotels”.
As for tourism, it’s not surprising that Dubai International (DXB), the world’s number one airport for international passengers, had won two awards in the past several months, of which the best airport in the Middle East and the first rank in the World Routes Marketing Award 2015. In terms of passenger traffic, it progressed by a yearly 12.9% to 44.98M up to July 2015, compared to 39.83M over the same period last year. Improvement can also be seen regarding Al Maktoum International (DWC) as cargo volumes continue to rise sharply in the first half of the year. In details, freight volume in tonnage jumped by 42% yearly by June 2015 to 443,012 tons. The Emirates’ hotel industry kept on showing healthy activity, as Dubai’s hotel (4 and 5 stars) occupancy rate up ticked by 1 percentage point (p.p.) y-o-y to 79% by September 2015 while the average room rate (AVR) dropped by 6.7% annually to $243 over the same period. Notably, the 79% level coupled with an AVR of $243 is still considered to be the highest in the region. Abu Dhabi’s hotel occupancy rate wasn’t far off, holding 3rd place at 76% (1 p.p. yearly decline) by September 2015, with an AVR of $173 (same level as last year).
The biggest impact of the drastic decline in international oil prices is expected to hit Emirates external position. Accordingly, UAE’s current account balance (including services, income and transfers) is expected to narrow by a yearly 80.27% to $10.71B by end 2015. This could be mainly attributed to the 37.62% estimated annual tightening of UAE’s trade surplus from $130.4B in 2014 to $81.32B in 2015. Even though total imports are projected to drop over the same period by 5.84% y-o-y to $226.36B, trade surplus will probably contract due to the 17.02% decrease in overall exports (hydrocarbons and non-hydrocarbons). In the same context, hydrocarbon exports are expected to drop to $61.43B in 2015. As for non-hydrocarbon exports, an annual 4.99% decline is forecasted to $246.21B.
Likewise, the UAE’s fiscal performance heavily waned. Consequently, the Institute of International Finance (IIF) forecasted that the consolidated fiscal primary balance (excluding net lending) will register a deficit of $14.95B (4.2% of GDP) by the end of 2015, down from a surplus of $19.92B (5.0% of GDP) in 2014. In details, hydrocarbon revenues are expected to contract by almost half from $102.50B (67.92% of total revenues) in 2014 to $61.12B (55.81% of total revenues) in 2015. As for non-hydrocarbon income, they are forecasted to stay relatively stable, at a $48B level at year end. Accordingly, total consolidated revenues may downturn by 27.44% yearly to $109.51B, over the same period. The consolidated government expenditures (excluding net lending) are projected to fall by an annual 5.00% to $124.46B in 2015, from a higher level of $131.01B registered the previous year.
On the monetary front, money supply M3, declined by 1% from July 2015 to $363.49B in August 2015. This drop was brought about by a reduced M2 (0.8% down tick over the same period) coupled with a 2.6% decrease in government deposits. Robust banking activity was depicted in the Emirates as illustrated by the 5.18% yearly growth in total assets, from $629.80B by August 2015 to $662.42B by August of this year. Furthermore, lending activity showed an improvement as it increased by an annual 4.59% to reach $367.79B over the same period. Likewise total deposits (resident and non-resident) showed positive momentum, increasing by 1.15% y-o-y to $389.86B by August. In details, this slight progress was attributed to the 21.14% yearly surge to $43.72B by August in total non-resident deposits which outpaced the marginal 0.91% annual decline to $346.14B in total resident deposits, during the same period.
A 23.19% decline in Brent crude oil price during Q3, 2015 due to continued market share protection from OPEC was probably the reason for the buffers on trading activity of Dubai and Abu Dhabi’s bourses. This was translated into the indices of both financial stock markets (Dubai and Abu Dhabi) witnessing respective 12.08% and 5.23% quarter-over-quarter falls to 3,593.28 points and 4,475.98 points by the end of September. Accordingly, Dubai and Abu Dhabi’s market capitalization narrowed from $97.76B and $120.26B by June 30, 2015 to $88.97B and $115.65B by September 30, 2015, respectively. In terms of trading activity, Dubai’s financial market average daily traded volume narrowed by 59.84% to 214.88M shares in Q3 at an average traded value of $101.89M (compared to an average daily traded volume of 535.06M shares worth $235.84M in Q2, 2015). Similarly, the number of transactions downturned to 258,950 down from 499,423 registered last quarter. Abu Dhabi experienced similar market dynamics, as the average daily volume fell by 27.03% quarter-over-quarter to 88.51M shares worth $59.17M in Q3, 2015 compared to 121.28M shares valued at $64.15M in Q2, 2015. As for the number of transactions, it summed up to 91,149 by end September, lower than the 115,322 transactions recorded by June 30, 2015.