|12-25-2014, 11:03 PM||#1|
Barclays says UAE best equipped to ajdust with lower oil prices
The United Arab Emirates (UAE) is the best country equipped to manage with potentially lasting weakness in oil prices among its GCC peers considering its strong buffers and health diversified economy, according to a research note by Barclays.
Barclays said the continued efforts by the government to diversify the economic structure and enhance the expansion of non-hydrocarbon sectors, most notably in Dubai.
The share of non-hydrocarbon sector jumped from 44.7% of GDP in 2000 to 61.1% of GDP in 2013.
Barclays said that the breakeven oil prices for the UAE is around $64 per barrel, considering exports of 2.6 million barrels per day in 2014.
Barclays said the economic recovery in Dubai should not be affected by weaker oil prices.
The preparations for the Expo 2020 are remarkably boosting economic growth in the Emirate, and GDP is expected to hit 5.7% this year and in 2015, and should continue to accelerate after that.
"We expect the Dubai government to continue its fiscal consolidation. Along with higher growth, fiscal improvements should allow government debt-to-GDP to continue declining in 2014 and 2015," Barclays analyst Alia Moubayed said.
The research noted that the liquidity in the banking sector be affected, but state support and corporate sector deleveraging should help.
Oil prices have fallen nearly 50% since a June peak, and speculations emerged that oil-rich countries like the UAE might start cutting spending to mitigate the decline in revenues.
However, the UAE has built up massive fiscal reserves over the last decade that could easily compensate the deficit in government budget.
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