Expo 2020 to fuel UAE non-oil sector growth in 2018: NBK

The United Arab Emirates’ non-oil sector growth will increase to 3.7 percent in 2018, up from 3.3 percent this year, and gradually rise to 4 percent in 2019, driven by Expo 2020 boost to tourism and construction sector, the National Bank of Kuwait (NBK) said in its latest report.

The non-oil sector growth should help offset continued weakness in the oil sector and deliver growth of around 3 percent in the overall economy, it added.

Earlier this month, International Monetary Fund (IMF) mission chief to the UAE Natalia Tamirisa told Argaam that the country’s non-oil sector growth would increase to 2.8 percent next year and 3.3 percent in 2019, up from 1.9 percent in 2017.

In its report, NBK said the UAE economy continues to perform better than many of its Gulf peers, with continued political stability and relatively high levels of diversification helping it cope with lower oil prices.

GDP growth will pick up from 2.2 percent in 2017 to around 2.6 percent and 3.4 percent in 2018 and 2019, respectively, well above the regional average, the report said.

While growth in the oil sector will remain capped in 2018 by the extension in OPEC production cuts until the end of next year, oil sector activity is projected to gradually rise from 2019 onwards following the expansion plans unveiled by government-owned oil firms, ADNOC and ENOC.

Meanwhile, consumer price inflation is forecast to rise next year after trending downwards for most of 2017. The report, citing latest figures, said inflation edged up from 0.8 percent in August to 1.1 percent in September year-on-year, as inflation in the food and housing components gained some traction.

NBK estimates inflation to climb from 2.5 percent in 2017 to 4 percent in 2018 on the back of new taxes including the 5 percent value-added tax (VAT).

VAT, which is due to be levied from January 1, is expected to add some 2 percent to inflation for one year, the bank said, adding, inflation will moderate to around 3 percent in 2019 after the initial impact of the VAT wears off.