Economic performance of Abu Dhabi follow-up report

Ali Majid Al-Mansouri, Chairman of the Department of Economic Development (DED) Abu Dhabi, has said that the local economy of the Emirate of Abu Dhabi has recorded new overall economic growth levels last year registering noticeable improvement in the non-oil sectors performance and showing a real growth of the GDP at 5.8% in the first quarter of 2014.

On the occasion of the issuance of the "Economic Performance of the Emirate of Abu Dhabi Follow-Up Report" by the Economic Development Department of Abu Dhabi, he said that there has been an improvement of performance based on development indicators on macro and sectors levels in several non-oil sectors such as the real estate, banking and tourism sectors.

The First Quarter Economic Performance Report of Abu Dhabi for this year, issued by the Department in cooperation with the National Bureau of Statistics of Abu Dhabi , included the results of the Consumers Trust Index in reference to the economic performance, National Family Conditions Observatory Index, General Index of Confidence in Business Climate and the Business Cycle Performance Indicators, in addition to the inflation in the Emirate of Abu Dhabi, accented by a futuristic look upon the Economy of the Emirate of Abu Dhabi.

Ali Majid Al-Masouri clarified that the results of the development indicators during the first quarter (Q1) of this year showed improvements in the levels of trust among consumers and business establishments in reference to the economic situation at the Emirate; these findings were based on positive assessments of the current situation and optimistic expectations of the future.

He added that despite the impact of the oil sector, in reference to the advancements witnessed worldwide in oil markets, and the impact on the Business Cycle Performance Indicators as a result of lowering oil prices, these indicators became reflective of the sturdy economy of the Abu Dhabi Emirate in light of the current and prevailing policies, which have been able to absorb all negative shocks and protect the consumer and the investor from them, particularly in non-oil sectors, while looking into the possibility of converting them into opportunities to empower the economic diversity in the Emirate.

He mentioned that the economic performance of the United Arab Emirates State has been good in non-oil sectors, during the first quarter (Q1) of 2015 according to the report results, and many sector indicators; whereas the overall State economic performance, as is the case with the rest of the oil-exporting countries, was affected by the international oil markets developments.

The Standard and Poor's Agency affirmed that the credit quality classification of the Emirate of Abu Dhabi was "AA+" level, and ruled out any effect of the current oil prices on the development projects that are being carried in Abu Dhabi.

Khalifah Ben Salem Al-Mansouri, Vice-Chairman of the Department of Economic Development (DED), added that the overall results are reflecting a continuity of good economic performance, particularly by the non-oil sectors, based on ascending levels of the General Index of Confidence in Business Climate, Consumers Trust Index and the National Family Conditions Observatory Index.

He also commended this performance despite the impact of the international oil markets developments, over the economy of the Emirate, and many other economies in the area, amid fears that it would impact the oil-exporting countries.

He clarified that the main General Index of Confidence in Business Climate, and its sub-indicators for Q1 2015 portray the optimism of businessmen and investors, and the rise of their trust in the business environment in the Emirate, in comparison with the same first quarter of last year, 2014.

This optimism, he added, has included economic establishments that are working in different activities across the Emirate, since the Main Consumers Trust Index indicators and sub-indicators of Q1 2015, have increased to levels of optimism amidst consumers of different characteristics, demographics and social backgrounds, denoted by their positive assessments of the current situation and their optimism towards the future.

The Vice-Chairman said the results of the National Family Conditions Observatory Index, during the above-mentioned Quarter, show that the trends and patterns of consumption among most national families have not been affected by the rise in prices, in addition to the retreat in the number of borrowers from national heads of households, as a reflection of success of efforts to rationalise consumer behaviour and borrowing.

On the contrary to all other indicators, he continued, as expected, the Business Cycle Performance Indicator reflects the impact of turbulences in international oil markets on the Emirate oil sector economy during Q1 2015, vividly seen in this report, and the detailed development indicators results of Abu Dhabi Emirate for Q1 2015.

He mentioned that the National Bureau of Statistics of Abu Dhabi estimates show that the GDP of the Emirate registered real growth at an annual average of 5.8% (Q1 2014) in comparison to 3.1% (Q1 2013) and 5.4% (Q4 2013).

Adding, that the average annual growth of the non-oil activities added values rose noticeably in the above-mentioned quarter reaching 12.7% in comparison to 2.6% in the same quarter of 2013, while oil activities added values retreated by -0.3% (Q1 2014) due to a decrease in oil prices and some retreat in the produced quantities.

Khalifah Al-Mansouri pointed out the steady rise in the average non-oil GDP growth, given efforts to diversify the local economy structure in the Emirates; so that the relative participation of the non-oil sector in the GDP of the Abu Dhabi rose to 50.4% (Q1 2014) versus 49.6% for the oil-sector.

He elaborated on the huge opportunity before Abu Dhabi given the features it enjoys, to take advantage of the international oil markets situation, and empower the performance of non-oil sectors to anchor economic diversity and compensate the losses due to decreased oil prices, on the short term, and to achieve the economic vision of Abu Dhabi 2003 on the long term.

He also pointed out that the Report shows improvements in the performance indicators of several non-oil sectors, within the Abu Dhabi economies (2015).

Rashed Ali Al-Za'abi, the Deputy Executive Director of the Planning and Statistics Sector, at the Department said, that the sector indicators (Q1 2015) reflect a strong economy of Abu Dhabi, and its ability to absorb the fears related to international oil markets developments, and adapt to these emerging changes.

He said the tourism sector shows recent data issued by the Abu Dhabi Tourism and Culture Authority that reflect improved sector performance (Q1 2015), as the number of hotel guests increased by 20% (Q1 2015) in comparison to Q1 2014, and reached more than one million guests.

He added the number of hotel room-nights in Abu Dhabi increased by 11% to about 2.9 million room-nights, hence a rise in the gross income of the hospitality establishments by about 14% reaching 1.8 billion Dirhams (Q1 2015). Occupancy reached 79% (Q1 2015) at no real change from Q1 2014.

The real estate sector, Al-Za'abi added, which was also monitored by the Report, showed a rise in rentals of housing estates by 4% (Q1 2015) in comparison to Q1 2014, with some retreat registered by Q4 2014.

This comes at a time the market is witnessing an increase in the supply, where housing units in the Emirate reached about 244,000 units (Q1 2015) hence reflecting a strong demand for housing units.

He added, that the office units rentals were more steady (Q1 2015), despite differences within these units, as some were "Class A" whose rentals increased, and "Class B" whose rentals were more steady, so was the case for retail stores that were also steady despite the increase in shop rentals outside the Island of Abu Dhabi.

Rashed Al-Za'abi mentioned that the overall market performance reflects stability despite the real estate units supply, on the one hand, and the increase in demand over all types of units, on the other hand. A corrective action was detected in rentals, which is expected to lead to market stability and sustainability in the sector performance on the medium term.

As for Abu Dhabi external trade of non-oil goods, Za'abi said that according to the published data, the gross amount of non-oil goods value reached 13.7 billion Dirhams (February 2015), registering a 16.8% increase compared to February of the year before.

This resulted from the rise in imports by 18.1% reaching Dh 9.8 billion, and exports by 18.8% reaching Dh 1.4 billion, he added.

He continued: "We notice a retreat in the gross value of foreign trade (Feb. 2015) compared to last year (Jan. 2014), due to the retreat in non-oil commodities that are re-exported, and decrease in imports of non-oil foreign trade (Jan. 2015) compared to same month the year before". The contributions of non-oil commodities exports from the gross foreign trade amount reached 18.2% (Feb. 2015).

One of the most important banking and financial developments, as Rashed Al-Za'abi, the Deputy Executive Director of the Planning and Statistics Sector at the Department said, was the good performance of the banking sector (Q1 2014) as the aggregate profits of Abu Dhabi's five listed banks in the Abu Dhabi Securities Exchange were 5.2 billion Dirhams (Q1 2015) at an increase of about 8.6% in comparison with those in the same quarter of 2014.

He pointed out that citizens own most of the shares in the Emirate of Abu Dhabi, so their owned shares by the end of March 2015 were 83% versus 17% to non-citizens.

According to the Economic Performance Report, the working banks assets grew by 9.1% (Q1 2015) compared to Q1 2014, reaching 2.38 trillion Dirhams (Mar. 2015), while the total solvency capital percentage stabilised in Q1 2015, and equated that of Q4 2014 at 18.2%.

It's worthwhile saying that the percentage is above the limits set by the Central Bank, hence reiterating the ability of working banks in Abu Dhabi to bear the burden of building additional allocations to meet the development in loans and lending, granted by these banks.

The total customers' deposits (residents and non-residents) at the working banks in the State rose by 8.8% (Q1 2015) reaching 1.45 trillion Dirhams, in comparison with 1.33 trillion Dirhams (Q1 2014).

There was an increase in the size of Certificates of Deposits at the Central Bank, coupled with the rise in liquidity in the market (Q1 2015) that reached 111.7 billion Dirhams (Mar. 2015) versus 99.5 billion Dirhams (Dec. 2014), at a retreat of about 6.2% on annual basis.

The General Financial Indicator of Abu Dhabi market ended with a retreat (Q1 2015) as a result of the retreat of some vital sectors like energy, real estate, and banks. The indicator decreased by 1.35% versus loss at 11.31% (Q4 2014), losing 61 points on the Index, closing the market at 4467.93 points (Mar. 2015).

This has been attributed to many reasons that led to the retreat of the financial market / Abu Dhabi Securities Exchange, namely the successive decline in oil prices since the beginning of the second half of 2014, where the price of the crude (Miban) oil declined from 111.65 US$/Barrel (Jun. 2014) to its lowest level of 46.40 US$/Barrel (Jan. 2015), that had not been witnessed (i.e. lowest level) since March 2009, at the time of the world economic crisis, when numerous companies delayed declarations of their financial status.

The services sector comes in the first place, in terms of citizens' shares ownership, at 97.5%, followed by the insurance sector at 96.1% and then the consumers' goods sector at 89.7%. However, data is showing the increasing interests among non-nationals (expatriates) to investment and buy shares in the electronic fund, debt tools, and energy at 52.1%, 35.8% and 32.9% respectively.

As per issued data from the Abu Dhabi Securities Exchange, the most buy-sell shares operations were performed by citizens, reaching 55.19% and 54.48% respectively, as for non-citizens, the percentages were 44.81% and 45.52% respectively.

Individuals led the way with the largest volume of trading (Q1 2015) reaching 3,974,325,684 in buying shares at 71.3% of the gross total of the buying transactions and 4,103,683,049 in selling shares at 73.6% of the gross total of selling transactions. The remaining percentages corresponded to total companies trading of 28.7% and 26.4% respectively.

The Report covered the Consumers Trust Index in the UAE. It is part of Nielsen's Consumer Confidence Index (CCI), so that the confidence of the consumer in the State was noticeably higher (Q4 2014) at 114 points compared to 112 points (Q3 2014).

The consumers in the UAE were found to be more trusting and optimistic, at the end of 2014 on the level of the Middle East Countries, covered by the Nielsen's Consumer Confidence Index (CCI), hence reflecting the continuity of the trust of consumers in the economic status in the State, despite recent international oil markets development, and retreat in oil prices during the second half of 2014.

The United Arab Emirates ranked the first among Arab Countries, and ranked in the 20th position internationally on the Happiness Index (2015) issued by the UN Sustainable Development Solutions Network (SDSN). The Index covers 158 country and is based on a group of main and sub-indicators related to the quality of health, the individual's share of the GDP, social support and trust (extent of corruption decline among public institutions and the business sector), in addition to the individuals' freedoms.

The International Monitory Fund (IMF) estimated the average economic growth of the Emirates at 3.6% (2014), and expects 3.2% in 2015, among the highest in the area.

Most recent published data by the National Bureau of Statistics of Abu Dhabi show that the gross total of the foreign trade of non-oil goods, of the UAE was 524.8 Billion Dirhams, during the first half of 2014. The imports amounted to 64.8% of the gross (above-mentioned) amount, and exports of non-oil commodities amounted 12.1%, and the re-exported stood at 23.1%.

Financially, the IMF expects a retreat from 12.1% of the GDP of the surplus of current balance, in the UAE in 2014 to about 5.3% in 2015, due to the decline in the international oil prices.

The records of the Ministry of Finance show that the actual performance of the budget over the first nine months of 2014 realised a surplus of 4.1 billion Dirhams amounting to 10.4% of the gross revenue during that period.

For banking and financial developments, and as per the figures of the Central Bank of the UAE, the monetary supply (N3), in the broad scene was 1377.2 billion Dirhams, end of March 2015, reflecting a rise of 1.2% over end of February 2015 figures of 1361.3 billion Dirhams. The gross bank deposit totalled 1.3%, end of March 2015, in comparison to February figures, hence reaching 1449.3 billion Dirhams. Meanwhile the total bank credit rose to 1410.2 billion Dirhams, end of March, at 1.2% compared to February. In local markets, and as per the data of the Abu Dhabi Securities & Commodities Authorities, the shares price index registered 4476.9 points, end of March, retreating by 2.3% compared to December 2014.

The IMF is expecting a retreat in the average inflation, on the general prices level, to about 2.1% (2015) compared to 2.3% (2014), where it registered record consumer prices in the State at about 124.7 points (Mar. 2015) as per the Consumer Price Index in the UAE Report, issued by the National Bureau of Statistics of Abu Dhabi.

This lead to an increase in the average annual inflation on State level, registering about 4.3% (Mar. 2015), so that the average inflation rate rose to about 3.9%, on average (Q1 2015). Observers are expecting a retreat in the average of inflation, amidst corrective measures on the level of real estate rentals.