26 April 2017

Improving macro-fundamentals give UAE a boost

Recent fiscal reforms and a strengthening private sector are helping the country post GDP growth that is above expectations

Contact us

Request a callback

Every customer enquiry is important to us. By providing details about your business interests we can direct your enquiry to our most relevant team member.

Please don’t enter confidential information such as your bank account details here.
All fields are mandatory unless otherwise indicated as optional.

  1. 01 Current Step 01
  2. 02 Step 02

Reason for contacting us

Enter a topic
Enter a topic

Contact details

Please enter your name
Please enter your telephone number

When may we call you?

Preferred time of day

We will call you within the next 3 business days

Back

Request a call-back - Your business interests (optional)

Every customer enquiry is important to us. By providing details about your business interests we can direct your enquiry to our most relevant team member.

Please don’t enter confidential information such as your bank account details here.
All fields are mandatory unless otherwise indicated as optional.

  1. 01 Completed Step 01
  2. 02 Current Step 02

Business size (optional)

Your business turnover

Your industry sector (optional)

Your market interest (optional)

Which international markets interest you?

Add your business interests

Please don’t enter confidential information such as your bank account details here.
All fields are mandatory unless otherwise indicated as optional.

Business size

Your business turnover

Your industry sector

Your market interest

Which international markets interest you?

Request a callback

  • Sorry

We’ve encountered a problem

We couldn’t send your message. Please try again, return later or call us on

Request a callback

  • Thank you

We’ll be in touch

A Relationship Manager from HSBC UAE will give you a call within three business days.

Your interests

  • Business name:
  • Turnover:
  • Sector:
  • Location:
  • International markets:

Add your business interests

We won’t sell your data or misuse it. Read how we handle your details in our cookie policy.

The UAE economy could blow past market expectations and post a 4% growth this year, according to a senior government official.

Sultan Al Mansouri, the UAE minister of economy, said the government is targeting growth of 3.5% to 4% this year on the back of World Expo-related economic activity. "We’re very optimistic," he told the media in March.

The growth target is much higher than the International Monetary Fund’s October forecast of 2.5% for the UAE economy.

Improving economic conditions has led the Dubai government to consider awarding a spate of contracts this year valued at AED 11 billion, as it prepares for the global event to be held in 2020.

BMI Research is projecting a "significant recovery in growth in 2017 and 2018", on the back of a strong non-oil sector.

"Preparations for the World Expo 2020 in Dubai will act as a catalyst for growth in the emirate’s construction industry, with new projects set for approval and construction at ongoing or stalled projects likely to be expedited," the research firm reported.

"Our infrastructure team expects around USD 6.9 billion to be earmarked for projects around the event."

A few contracts have already been awarded, notably Dubai-based joint venture Al Futtaim Carillion (AFC) winning a AED 2.2 billion contract to build the three main “Theme Districts” at the Dubai Expo 2020 site. This follows a competitive tender that saw 35 bids from international and domestic operators.

ECONOMIC INDICATORS

Other indicators show the economy is on the mend after a two-year decline in crude oil prices. Credit growth in the country grew at its fastest pace in five months, according to the Central Bank of the UAE.

Encouragingly, credit growth in February was driven by a 1.9% increase from government-related entities (GREs), compared to two consecutive months of decline, which suggests the GREs are gearing up for a renewed investment plan.

However, the private sector’s month-on-month credit growth remained subdued at 0.2%, leading to a 5.4% deceleration, year on year.

The country’s purchasing manager’s index also saw the strongest upturn in output in one-and-half years.

“Business conditions in the UAE’s non-oil private sector continued to improve in February, with a sharp and accelerated increase in inflows of new work, underpinning a robust expansion of output,” business research firm Markit said in its monthly report.

Strong demand conditions and a favourable economic environment encouraged companies to scale up purchasing activity and hire additional workers over the month, the firm added.

VAT ROLLOUT

Meanwhile, the UAE Ministry of Finance said it will start registering companies eligible to pay valued added tax in the second half of 2017, as part of the government’s effort to roll out the 5% levy from 1 January 2018.

The new tax is expected to generate AED 12 billion for the government in the first year of implementation and another AED 20 billion by 2020, according to a government forecast.

Businesses that provide taxable goods or services with annual revenue exceeding AED 375,000 are required to register, while businesses between the AED 187,500 and AED 375,000 will have the option to register.

The UAE has also established a Federal Tax Authority to roll out VAT and is tasked to collect and enforce federal taxes. It will also perform tax audits and administer penalties in cases of non-compliance.

The Federal National Council recently approved a draft law to impose VAT and excise duties on items, such as tobacco, soft drinks and energy drinks, with the implementation of a legal framework for taxation.

"These workshops also serve to underline the importance of the new tax system as a necessary step towards securing a sustainable future for the UAE, while making sure businesses are fully prepared to file their tax returns and adapt to the new tax law," Younis Haji Al Khoori, undersecretary of the Ministry of Finance, told state-owned news agency Wam.

The introduction of value added tax in the UAE next year, in tandem with the other GCC countries, will boost government revenue, which has taken a hit due to falling oil prices.

“One of the key unknown facts is whether VAT registration will apply to free zones companies and branches, and whether entities in the financial free zones (the DIFC and ADGM) will be treated differently to companies in the ‘classic’ free zones (such as JAFZ and Creative Clusters),” said UAE-based law firm Clyde & Co.

UAE CREDIT GROWTH

 

2016

2017

 

 

Mar

June

Sep

Dec*

Jan

Feb*

M-o-M%

Gross Credit

1517.5

1543.4

1566

1574

1577.5

1585.6

0.50%

Domestic Credit

1404.4

1426.3

1446.1

1453.6

1454.1

1460.7

0.50%

Government

168.7

168.6

174.1

172.5

172.9

172.9

0.00%

Public Sector (GREs)

180.8

187.7

188

187.1

185.4

189

1.90%

Private Sector

1029.6

1051.6

1065.8

1076

1076.6

1078.5

0.20%

Business & Industrial Sector Credit

693.5

709.7

720

727.8

727.6

728.6

0.10%

Individual

336.1

341.9

345.8

348.2

349

349.9

0.30%

Non-Banking Financial Institutions

25.3

18.4

18.2

18

19.2

20.3

5.70%

Foreign Credit

113.1

117.1

119.9

120.4

123.4

124.9

1.20%

Bank Deposits

1502.6

1493

1508.7

1562.9

1561.9

1581.4

1.20%

Source: UAE Central Bank

You are leaving the HSBC CMB website.

Please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.