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| 06 November, 2017

Running with the bulls: UAE poised for growth

A majority of UAE-based CEOs - about 70% - are bullish on the UAE economy thanks to a strong infrastructure, a stable political environment, an increasingly stronger inflow ahead of Dubai Expo 2020

Businessmen are seen at the Dubai International Financial Centre March 21, 2010.

Businessmen are seen at the Dubai International Financial Centre March 21, 2010.

REUTERS/Ahmed Jadallah
A majority of UAE-based CEOs - about 70 per cent - are bullish on the UAE economy thanks to a strong infrastructure, a stable political environment, an increasingly stronger inflow ahead of Dubai Expo 2020 and diversification policies embarked upon by the government, according to the latest quarterly CEO Sentiment Survey conducted by Khaleej Times.

Around 25 per cent of the respondents believe the economy will remain stable while 5 per cent have a bearish outlook over the next six months.

Rizwan Sajan, chairman of Danube Group, is bullish on the country's economic prospects on the back of its strategic location as a trading hub for re-exports, well-developed infrastructure, openness and transparency, politically stable environment, investment acceleration because of the build-up for Expo 2020, the rise in tourism and the timely introduction of value-added tax (VAT) and excise duties, which would diversify government revenues.

"I have always been bullish on the UAE economy. Currently, the UAE economy is the most versatile and dynamic economy as well as one of the largest national economies in the Arab world. The leaders have been truly visionary and have created a world-class infrastructure which ensures collective growth of all businesses," he says.

Nawab Shaji ul Mulk, chairman of Mulk Holdings International, cites the policies introduced by Dubai's government as key factors driving the country's growth.

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"I am quite bullish on the prospects for the UAE economy. Expo 2020, the growing UAE-India economic ties as announced recently at the forum in Dubai, policies of the government - all these will factors will contribute to boost the economy," he says.

Global financial institutions have projected stronger growth for the UAE next year compared to 2017, with Euromonitor International and Moody's Analytics forecasting 4.4 and 3.8 per cent, respectively, while both the IMF and Emirates NBD foresee 3.4 per cent growth. Citigroup and the World Bank have predicted 3.3 and 2.5 per cent GDP growth for the UAE, respectively.

Interestingly, most business minds that Khaleej Times picked for the survey are happy with the implementation of VAT as it diversifies UAE government's revenue sources.

Most maintain that the prospect of VAT-imposition will boost consumption in pre-VAT months while consumption may get temporarily impacted once VAT is imposed.

"The first half is going to be a bit dull due to impact of VAT but will pick up in the second half," believes Deepak J. Babani, CEO of Eros Group. "In addition, Expo 2020, improving global equity markets, increased tourist numbers to Dubai and higher oil price augur well for the economy. Oil is trading around $60 a barrel, and if it sustains this level, spending in the GCC should improve," he adds.

Shailesh Dash, founder and board member at Al Masah Capital, said regional economies are recovering from lower crude price. As the confidence of retail investors improves and the spending cycle starts, the UAE's economy will be on a much stronger footing and will see faster growth, he maintains.

Dash points out that recovery in crude prices, increased construction activity and public spending, growing consumer confidence and growth in non-oil economy will make the executives and investors bullish on the economy.

What about VAT?

Nearly 75 per cent of UAE companies that participated in the KT survey say they will fully pass on VAT to consumers while the remaining 25 per cent will do it partially once it is implemented on January 1, 2018.

According to the survey, conducted over August and September 2017, 76 per cent of companies were not fully ready for VAT at the time of responding, but were confident of meeting the deadline. The remaining 24 claimed that they were ready ahead of the rollout of VAT.

Barring certain sectors and services, the UAE government has announced the imposition of a 5 per cent VAT - one of the lowest VAT rates in the world - on a host of goods and services as part of the GCC agreement.

"I think the benefits will outweigh short-term inconvenience as the economy continues maturing and the tax will allow continued government spending in infrastructures, while generating moderate level of inflation," says David Godchaux, CEO of Core Savills.

He noted that smaller businesses that see their services/goods exempt from VAT will obviously be the most impacted, as they will have to absorb the whole VAT passed from their suppliers as non-recoverable cost increase. "As 5 per cent remains a moderate rate, I expect a lot of them to pass a partial to full amount of their cost increase to their customer," he adds.

More jobs in UAE

Results of the KT survey show that 86 per cent of companies that responded are looking to hire during the fourth quarter of 2017 while just while 14 per cent said they don't plan to recruit in the current quarter.

Colm McLoughlin, CEO of Dubai Duty Free, revealed that the company plans to recruit additional staff in the fourth quarter including local hires and overseas, particularly, Chinese nationals.

Oil price recovery

Replying to a query about the outlook for crude prices, a majority - 37 per cent - of respondents believe that oil prices will be $50 or lower over the next few months. Around 26 per cent of executives forecast oil will be trading over $60 per barrel while 21 per cent see it priced at $60 or below. Around 16 per cent see it trading around $40 or lower per barrel.

Michael Lahyani, founder and CEO of Propertyfinder Group, says new suppliers and advanced technology, which makes shale oil economically feasible at much lower prices than in the past, are effectively capping oil prices. This, combined with improving technologies and demand for electric-powered cars, make $100-plus per barrel very unlikely within the next five years, if ever.

Advertising and marketing spend

Most respondents see online as the best platform to advertise, followed by social media, outdoor, print, radio and TV.

Approximately 39 per cent of companies believe social media and online offer best returns to their businesses. These were followed by print and outdoor media with 34 per cent, followed by TV and radio at 27 per cent.

McLoughlin said: "We are constantly reviewing our print, digital and outdoor media including social media. The media scene is changing and we need to be seen in most of the forms."

Walid Hanna, CEO of MEVP, said digital and social media are among the most important elements of a marketing campaign in today's increasingly digital world. These channels represent a more cost-effective way of reaching a far wider audience, they have a higher rate of converting into sales, and they allow brands to interact with consumers in real-time, leading to higher customer retention.

Around 70 per cent of executives revealed in the survey that they shifted budget to online advertising from print, digital and outdoor in the last quarter. The remaining said there was no shift in their budget allocations.

"For the first time this year, our social and digital marketing budget exceeds our more traditional print budget, reflecting this gradual change of priorities," said Godchaux.

- waheedabbas@khaleejtimes.com


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