Lower oil prices will hit growth as government spending and consumer confidence falls. We forecast real GDP growth at 2.8% and 2.6% in 2016 and 2017 from an estimated 4.0% in 2015
We expect Dubai to outperform Abu Dhabi, with the former benefitting from increased activity in the trade and tourism sectors, as well as lower exposure to oil prices.
Credit growth to the private sector will remain relatively slow through 2016 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.
Any attack by Islamist militants would result in a fundamental reappraisal of both the UAE's, and the wider region, risk profile.
A further uptick in tensions between the West and Iran could result in a deterioration in the UAE's sovereign risk profile given the close proximity and deep trade ties between the two countries.
|Real GDP growth, % y-o-y||4.6||4.0||2.8||2.6|
|Nominal GDP, USDbn||399.4||369.3||390.9||412.8|
|Consumer price inflation, % y-o-y, eop||3.7||3.6||3.0||3.2|
|Exchange rate AED/USD, eop||3.67||3.67||3.67||3.67|
|Budget balance, % of GDP||5.0||-5.9||-6.1||-4.7|
|Current account balance, % of GDP||14.5||3.6||1.2||2.0|
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