01 August 2016

Gulf Industry magazine helps you catch up with the numbers behind economic and industrial developments in the region.

UAE non-oil growth could stretch over 4pc 

NON-hydrocarbon growth in the UAE is expected to increase by more than 4 per cent over the medium term as the dampening effect of fiscal consolidation is offset by improvements in economic sentiment and financial conditions, the International Monetary Fund (IMF) has said.

This will be aided by a rise in oil prices, a pickup in private investment in the run-up to Expo 2020, and stronger external demand, said a statement released following the conclusion of the IMF Executive Board’s consultations with the UAE.

Persistently lower oil prices continue to weigh on economic sentiment and fiscal and external positions, but large buffers built over time have provided ample policy space, limited negative inward spillovers and contained the weakening of investor appetite, the statement said.

Non-oil economic activity slowed to 3.7 per cent in 2015 driven by a contraction of public investment in the context of fiscal consolidation, and lower contribution from domestic private demand. Negative effects on overall growth were partially offset by the increase in oil production. Despite the strong fiscal policy response to adjust to lower oil prices, the fiscal balance turned to a deficit of 2.1 per cent of GDP, while the current account surplus declined to 3.3 per cent of GDP. Banks remained well capitalised and liquid, though pressures on profitability are emerging as asset quality weakens due to the economic slowdown and rising funding costs, it said.

Economic activity is expected to moderate further in 2016, before improving over the medium term. Non-hydrocarbon growth is projected to slow to 2.4 per cent in 2016 due to fiscal consolidation, the stronger dollar, and tighter monetary and financial conditions.


Bahrain’s economy expands 4.5pc in Q1

BAHRAIN’S economic growth reached 4.5 per cent during the first quarter of the year, the kingdom’s highest level since 2014, led by the 12.1 per cent year-on-year growth in the oil sector, a report said.

Nearly $4 billion of projects have now been tendered under the GCC Development Fund, with nearly $3 billion of projects already commenced, marking a near tripling from a year earlier, added the Bahrain News Agency report, citing the latest Bahrain Economic Quarterly issued by the Economic Development Board (EDB).

The EDB report also noted that the non-oil economy continued to grow and benefit from major infrastructure investment.

Private sector projects are making good progress, such as Alba Line 6, said the report.

While growth continued to be broad-based across the non-oil economy, performance was particularly strong in social and personal services with 8.4 per cent year-on-year gain, the news agency report highlighted.

This resilience momentum in the non-oil sector has helped to support strong growth in private sector employment. Overall employment saw an almost 7 per cent year-on-year increase in Q1, with the private sector creating 46,669 jobs as compared to Q1 2015, a 9 per cent year-on-year gain.



DFM Q2 net profit falls 60pc

DUBAI Financial Market (DFM) reported a 60 per cent fall in second-quarter net profit as revenue fell.

The firm made a net profit of Dh53.5 million ($14.6 million) in the three months to June 30, down from Dh132.4 million in the year-ago period, it said in a statement.

Revenues fell to Dh100 million in the quarter, compared with Dh178.1 million in the corresponding three months of 2015.

Trading commissions are the main source of income for DFM. While it did not provide a quarterly breakdown, the firm said the value of shares traded in the first six months of 2016 was down 32.7 per cent year on year to Dh69.5 billion.

Essa Kazim, chairman of DFM, said: “The slowdown in trading activity during the first half of 2016 has overshadowed the revenue and profit of the DFM Company. Meanwhile, the market has demonstrated a high level of resiliency considering the unfavourable circumstances of lower oil prices as well as international markets’ volatility.”



Mideast M&A transactions slide 29pc

THE value of announced mergers & acquisitions (M&A) transactions with any Middle Eastern involvement reached $18.7 billion during the first half of 2016, a decline of 29 per cent compared with the first half of 2015, according to a report.

The value of announced M&A transactions with any Middle Eastern involvement reached $18.7 billion during the first half of 2016, a decline of 29 per cent compared with the first half of 2015, according to the Thomson Reuters quarterly investment banking analysis for the Middle East region.

Nadim Najjar, managing director, Mena, Thomson Reuters, said it was the slowest first six months for deal-making in the region since 2014.

|“Middle Eastern equity and equity-related issuance totalled $1.1 billion during the first half of 2016, an 80 per cent decline from the first half of 2015 and the slowest opening six-month period for equity capital markets issuance since 2004. Bolstered by a record-breaking second quarter, Middle Eastern debt issuance reached $32.9 billion during the first half of 2016, a 45 per cent increase compared to the value raised during the first half of 2015 and the strongest first half for DCM issuance since records began in 1980,” he added.  

Middle Eastern investment banking fees reached $416.8 million during the first half of 2016, an 8 per cent increase compared to fees recorded during the first six months of 2015 and the strongest period for investment banking fees in the region since 2014.

Fees from completed M&A transactions totalled $104 million during the first half of 2016, a 24 per cent decrease compared to a year ago and the slowest first half for M&A fees since 2012.  



ADIA suffers drop in returns

ABU DHABI Investment Authority (ADIA), one of the world’s biggest sovereign wealth funds, has said it would remain a patient, long-term investor despite a drop in its returns last year due to slowing global growth.

In US dollar terms, the 20-year annualised rate of return on ADIA’s portfolio fell to 6.5 per cent in 2015 from 7.4 per cent the year before, the fund said in its annual review. The 30-year rate of return slipped to 7.5 per cent from 8.4 per cent. The drop was mainly the result of strong returns in the mid-1980s and 1990s falling out of the rolling averages, and the recent returns were consistent with historical levels, the review added.

“Against a backdrop of slowing global growth, ADIA’s investment strategy will remain focused on identifying long-term trends and patiently growing capital,” managing director Sheikh Hamed bin Zayed Al Nahyan said.

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