United Arab Emirates Business Forecast Report Q4 2011

Core Views
We are broadly in line with consensus in our forecast that sees real GDP expanding by 3.3% in 2011, and averaging 3.7% through
2015.
Abu Dhabi will outperform Dubai over the coming years, given the former’s large-scale investment plans targeting the infrastructure sector and ongoing concerns surrounding the latter’s lingering debt repayment schedule.
With credit conditions still relatively weak, a pronounced recovery in non-hydrocarbon sector growth appears unlikely at this stage.
Major Forecast Changes
On the back of higher oil revenues and a marked improvement in tourist arrivals, we have revised up our 2011 current account forecast and now project a surplus of 6.7% of GDP, compared with 3.6% in 2010. With real estate prices looking like they have further to fall, we recently revised down our end-2011 consumer price inflation forecast to 2.0% from 3.0% previously.
Key Risk To Outlook
Any outbreaks of public unrest would have significant repercussions for the country’s reputation as an inherently stable environment for foreign investment.
Further debt restructurings by major government related entities in 2011 would do little to inspire confidence that the UAE’s financial
troubles are now firmly in the past.
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Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risk To Outlook5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Foreign Policy 8
Supporting Democratic TransitionsAbroad
The UAE will remain keen on supporting ongoing democratic transitions across North Africa, while attempting to preserve the status quo closer to home
Table: UAE political Outlook8
Long-Term Political Outlook 9
Three Challenges For The Coming Decade
The UAE is not without its challenges Yet it is one of the more stable Gulf states over the long term, with a small, wealthy population, no history of terrorism, and no sectarian tensions to speak of
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings 13
Economic Activity 14
GDP Revisions Confirm Core Views
Recently released GDP data from the National Bureau of Statistics in the United Arab Emirates confirm our view on the extent to which the economy suffered as a result of the 2009 global financial crisis
Table: ECONOMIC ACTIVITY14
Economic Activity ll 16
BMI On The Ground: Assessing The ‘Safe Havens’
Our recent visit to the UAE and Qatar confirmed our view that business activity throughout the Gulf is beginning to pick up following a relatively subdued first half of 2011
Balance of Payments 18
Iran Sanctions To Curb Re-Export Sector
We project the UAE’s current account surplus expanding to 67% of GDP in 2011 from 36% last year
Table: CURRENT ACCOUNT19
Monetary Policy 20
Inflation To Remain Benign Heading Into 2012
Consumer price inflation in the UAE will remain anaemic heading into 2012, as the ongoing real estate overhang continues to weigh heavily on housing costs
Table: MONETARY POLICY20
Banking Sector 22
Structural Weaknesses Overshadow Green Shoots
The UAE’s banking sector will remain on its slow road to recovery heading into 2012
Regional: Sovereign Risk Ratings 23
Unprecedented Election Cycle Raises Risks
Table: MENA – Recent Economic and Political Reforms24
Table: MENA SOVEREIGN RATINGS – EVOLUTION OF WILLINGNESS TO PAY 25
Chapter 3: 10-Year Forecast 27
The UAE Economy To 2020 27
Greater Caution, Slower Growth
After its recent experience of boom and bust, we are forecasting a slower but more sustainable growth trajectory for the UAE over the next five to 10 years
Table: UNITED ARAB EMIRATES Long-Term Macroeconomic Forecasts 27
Chapter 4: Business Environment 29
SWOT Analysis 29
BMI Business Environment Risk Ratings 29
Business Environment Outlook 30
Institutions 30
Table: BMI Business And Operation Risk Ratings30
Infrastructure 31
Table: BMI Legal Framework Rating31
Table: Labour Force Quality32
Table: Middle East and Africa – Annual FDI Inflows33
Market Orientation 34
Table: Trade And Investment Ratings34
TABLE: TOP EXPORT DESTINATIONS35
Operational Risk 36
Chapter 5: Key Sectors 37
Pharmaceuticals 37
Table: Generic Drug Sales Indicators 2007-201538
Table: OTC Medicine Sales Indicators 2007-201539
Table: Medical Devices Sales Indicators 2007-201540
Table: Prescription Drug Sales Indicators 2007-201541
Table: Patented Drug Market Indicators 2007-201541
Telecoms 41
Table: Telecoms Sector – Internet – Historical Data & Forecasts 42
Table: Telecoms Sector – Fixed Line – Historical Data & Forecasts 42
Table: Telecoms Sector – Mobile – Historical Data & Forecasts 43
Other Key Sectors 44
Table: UNITED ARAB EMIRATES Autos Sector Key Indicators44
Table: UNITED ARAB EMIRATES Food and Drink Sector Key Indicators 44
Table: UNITED ARAB EMIRATES Infrastructure Sector Key Indicators 44
Table: UNITED ARAB EMIRATES Defence and Security Sector Key Indicators 44
Table: UNITED ARAB EMIRATES Oil and Gas Sector Key Indicators 45
Table: UNITED ARAB EMIRATES Freight Transport Sector Key Indicators 45
Chapter 6: BMI Global Assumptions 47
Global Outlook 47
Second Half Risks
TABLE: GLOBAL ASSUMPTIONS47
Table: EMERGING MARKETS AGGREGATE GROWTH48
Table: DEVELOPED STATES REAL GDP GROWTH FORECAST49
Table: REAL GDP GROWTH CONSENSUS FORECASTS4
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