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UAE and Dubai Expected to Grow at 3.5% in 2013: Standard Chartered

Middle East : 26 April 2013

Source: Gulf News 2013

Dubai: Standard Chartered expects Dubai to perform better this year than last as improving numbers of the fundamental sectors of the economy, a low interest rate environment and strong confidence drive growth.

The British lender forecasts a 3.5 per cent GDP growth for the UAE and it will be around the same level for Dubai.

“We expect positive and good and solid growth in the UAE and Dubai as well,” said Marios Maratheftis, global head of macroeconomic research at Standard Chartered Bank , at a press briefing yesterday. “Three and a half per cent with a low credit growth … is good, solid [and] sustainable growth.”

Amid this growth expectations, Dubai’s debt issue still remains.

But even with its debt overhang, Maratheftis thinks “Dubai is still growing solidly.”

“We do think that there are $48 billion worth of debt (across the board) maturing between 2014 and 2016,” he said. “But given the growth, given the low global interest rate environment, I think access to international markets for Dubai will continue.”

Increased economic and investment activity is the reason for Standard Chartered’s buoyant expectations on Dubai’s performance in 2013. The economist cited hospitality numbers, which are back to pre crisis levels even as hotel capacity has doubled since then, strong retail growth and positive impact of regional trade on Dubai’s logistics sector as clear evidence of a pick up in growth.

The flurry of real estate project announcements since the end of last year, including off-plan ones this month, are not raising undue concerns for the bank. And that is for two reasons.

An essential ingredient for bubble is rapid loan growth, said Maratheftis, which is absent this time. Back in 2007-2008 credit in the UAE was growing at 55 per cent year on year, which he said was “neckbreaking credit growth”.

“This time around there is zero credit growth. Liquidity through credit is not really there,” he added.

The second reason that he is not really concerned of a real estate bubble is because there is a clear differentiation in the housing market.

“It is not one housing market,” said Maratheftis. “Different areas have different dynamics. The completed communities with infrastructure are doing well in Dubai and the communities that are not completed and do not have infrastructure are not doing well. It may be stating the obvious but this was not the case in 2007 and 2008. In 2007, people wanted to buy anything.

“It looks like it is fundamentals driven market now, which is dominated by true investors and by end users. So I think [this time] it is a healthy and sustainable rally in the housing market.”

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