Dubai Forums Dubai Discussions Dubai General Chat

Now I would go with this report bad or good because it is an expert analysis and yes it is long so get off my back , if you don't wana read it just scroll down. I'm just posting it for the benefit of other members who is concern about the recession.


Important disclosures can be found in the Disclosures Appendix. Ref: GR-J0109

Analyst
Mary Nicola, +9714 508 3627
Standard Chartered Bank, Dubai
Economist
Mary.Nicola@standardchartered.com
UAE – Braving the storm
08:00 GMT 20 January 2009

• UAE is set to increase fiscal spending in 2009
• We forecast GDP growth at 0.5% in 2009
• Key sectors are expected to slow; fiscal spending to increase
Macro-economy

Following years of impressive growth, the UAE economy is cooling off. Budget and current account surpluses
will allow the government to increase fiscal spending to combat the slowdown. The UAE has announced its
largest budget in history for 2009 – AED 42.2bn (USD 11.5bn), a 21% increase from 2008. The government
expects a balanced budget this year, following surpluses exceeding 10% of GDP from 2004-08.
During 2007 and most of 2008, the economic boom was fueled by ample liquidity and a massive rally in the
housing market. However, the cycle is turning, and these factors can no longer drive the economy. Tight
liquidity is affecting investment, with several projects put on hold, and consumers are becoming cautious. A
global recession, liquidity tightness, and falling oil prices will all take a toll on the UAE economy, in our view.
The effects of the global downturn are already being felt in the UAE, a small, open economy. Global
sentiment and weaker demand have driven down oil prices, making a significant dent in the nation’s overall
exports and revenues. Oil production in the UAE dropped after the most recent OPEC meeting to 2.2mn bpd
from 2.6mn bpd in September 2008. The slide in oil prices will have a significant impact on government
revenues if oil falls to below USD 45 and stays there. Historically, trade has played a significant role in the
UAE economy. Dubai has established itself as the third-largest re-export centre in the world, and re-exports
comprised 44% of its GDP in 2007. But with the world economy in recession, global trade is slowing.
Table 1: Forecasts
GDP Growth (%) Inflation (%) Current account
balance (as % of GDP)
2007 5.2 11.1 22.0
2008 4.8 12.0 29.0
2009 0.5 2.5 10.5
2010 3.5 3.0 16.0
Source: SCB Research
| Country Briefing |
http://research.standardchartered.com
2
Country Briefing | 20 January 2009
Ref: GR-J0109
A lack of funding has constrained several of the country’s key sectors, including construction and real estate.
The construction industry, the fourth-largest contributor to the UAE’s GDP and the third-largest contributor to
Dubai’s GDP (accounting for 9.5% and 12.74%, respectively), slowed in 4Q-2008. According to the Middle
East Economic Digest, the value of contracts awarded in the UAE fell by 40% q/q during the quarter. Many
projects have been put on hold due to tight liquidity and a slowing market, and several contractors have been
forced to lay off workers. The same applies to the real-estate sector. Large property developers have laid off
staff in the past few months and projects have been put on hold. The Real Estate Regulatory Agency
announced that it cancelled the licenses of 28 real-estate development companies in Dubai at the companies’
request because they could not meet their obligations.
Tourism is also likely to suffer. As the UK accounts for the largest number of tourists to the UAE, we can
expect the slowdown in the UK economy to reduce tourist arrivals. Already in Q3-2008, hotel occupancy rates
in Dubai fell to 75.2% from 83.1% in Q3-2007. We expect a further deterioration in Q4-2008 and Q1-2009 as
the global economy falls deeper into recession.
The Dubai Shopping Festival, which normally attracts over 3 mn visitors, will likely see fewer this year. The
Dubai Department of Tourism and Marketing announced that hotels would offer discounts of up to 60% and
are shifting their marketing focus away from European tourists and more toward those from Asia and the Gulf
region, where markets are less affected by the global crisis. Dubai is offering incentives to tourists even
though the winter months are generally the peak tourist season. Whereas 1Q-2008 saw a 90% occupancy
rate, some hotels have reported 10-30% occupancy rates over the past few months.
As for Abu Dhabi, projects have been prioritised due to difficulties financing them commercially. However, the
government has said that plans for the Guggenheim and Louvre museums will proceed, as they are part of
the government’s strategy of transforming Abu Dhabi into the region’s cultural capital.
The biggest risk facing the UAE economy is related to its labour market. With the majority of the labour force
made up of foreign nationals, rising job losses could lead to a reversal in population flows. Foreign nationals
who lose their jobs have to leave the country within a short period of time. According to the Ministry of
Economy, the expatriate population grew by close to 7% in 2007, with expatriates totaling 3.62 mn, against
only 864,000 nationals. How these demographic factors play out will have serious consequences for the
economy.
While there is no official data on the current status of the labour market, there are signs that the UAE is
shedding jobs. While construction and real estate are the worst-affected sectors, job losses now seem to be
spreading to other sectors. Ministry of Labour officials were quoted in the local press saying that visa
cancelations in Dubai have accelerated since October 2008, and are now averaging 1,500 a day and
exceeding 2,000 on some days. The labour market usually lags the business cycle, so the hope is that the job
losses currently evident on the ground are mostly a reflection of what has already happened to the economy
rather than an indication of where it is heading.
Nevertheless, policy needs to focus on avoiding a sharp deterioration of the labour market (as well as
improving liquidity conditions) to prevent a deep recession and to ensure that fiscal stimulus measures
announced by the federal and Dubai governments are effective. Our view is that growth will decelerate to
0.5% in 2009, with the first half being the worst. Positive structural factors (surpluses, diversification, and
infrastructure investment) should allow the UAE to stage a modest recovery in H2, with the economy
performing better in 2010. The silver lining in all of this is that we expect inflation in 2009 to average 2.5%,
down from an estimated 12.0% in 2008.
3
Country Briefing | 20 January 2009
Ref: GR-J0109
Exchange rate
The UAE dirham (AED) is pegged to the USD at the rate of 3.67. The leaders of the Gulf countries plan to
adhere to a 2010 deadline for monetary union. Earlier this year, the region’s finance ministers and central
bank governors approved a draft of the monetary institute agreement which is the precursor to the Gulf
Central Bank. While the leaders did not finalise the agreement, they expect to finalise the logistics of
monetary union this year. However, without the proper institutions in place, the 2010 deadline may be difficult
to meet. After much speculation over a potential dropping of the USD peg, it seems that any such plans are
on hold for now. The need for a more flexible exchange rate, however, is as strong as ever.
Monetary policy
Reflecting the peg to the US dollar, local interest rates generally track US interest-rate movements –
monetary policy has in effect been outsourced to the US Federal Reserve. We expect US rates to fall to 0.5%
by the end of 2009. However, liquidity in the UAE remains tight. Interbank rates are stubbornly high and have
decoupled from US rates despite the currency peg. The authorities have responded with a liquidity support
facility, direct injections of liquidity, and, more recently, a USD swap facility. The problem persists, however,
as banks in the UAE overstretched themselves during the good times. Their advance-to-deposit (A/D) ratios
are now in excess of the required 100%, making further lending difficult.
Furthermore, the central bank lacks the necessary tools (such as a fully functioning repo window on a
business-as-usual basis) to manage liquidity effectively. This means that cost of capital in the UAE is high;
high interbank rates reflect this reality. Tight monetary policy is not what the economy needs right now. We
therefore expect further policy responses by the authorities to ensure adequate liquidity, with the policy rate
moving closer to 0.5%. Until this happens, rates will remain tight. We do, however, expect money supply
growth and inflation to subside as a result of the economic slowdown and lower oil prices in 2009.
Fiscal policy
The government has adopted an expansionary fiscal policy. The cabinet approved the largest budget in
history for 2009, a 21% increase over 2008. As part of the UAE’s long-term strategy, the government has
prioritised education, allocating 23% of the federal budget to it. The 2009 budget also includes a 24%
increase in infrastructure spending versus 2008. The government of Abu Dhabi is contributing approximately
40% to the federal budget, while Dubai is contributing 2.8%. Income from ministries contributes about 57% to
the federal budget. Higher infrastructure spending is necessary to counter a likely slowdown of consumption,
investment, and net exports in the current environment, in our view.
The UAE federal budget covers ministerial and federal expenditures in areas such as the military, education,
health care (Abu Dhabi and Dubai have their own health-care systems), and other social services. In addition,
each emirate has its own budget covering state-level expenditures including the police, infrastructure
spending, and social benefits.
Dubai’s government announced a 42% increase in spending for 2009 and is forecasting a budget deficit. We
believe this is the right policy response, as government spending is needed to pick up the slack from the
economic slowdown. Dubai’s is based on an average oil price of USD 45 pb. The spending increases will be
allocated to infrastructure, transportation, and social services. Infrastructure spending will see a 33% increase
over 2008. The largest portion of the overall budget, 45%, will be allocated to road and transportation, Dubai
municipality, and port projects. Dubai, the only emirate so far to issue a state budget for 2009, projects a
fiscal deficit of AED 4.2bn, 1.3% of the emirate’s GDP. The budget projects government revenues of AED
33.5bn (USD 9.1bn) and expenditures of AED 37.7bn (USD 10.3bn). When government-controlled entities
are also included, total revenues reach AED 138bn (USD 37.6bn), 2% higher than 2008, and total
expenditure reaches AED 135bn (USD 36.8bn), 9.2% higher than 2008.
4
Country Briefing | 20 January 2009
Ref: GR-J0109
Disclosures Appendix
Global disclaimer
SCB makes no representation or warranty of any kind, express, implied or statutory regarding this document or any
information contained or referred to on the document.
If you are receiving this document in any of the countries listed below, please note the following:
United Kingdom: Standard Chartered Bank ("SCB") is authorised and regulated in the United Kingdom by the Financial
Services Authority ("FSA"). This communication is not directed at Retail Clients in the European Economic Area as defined
by Directive 2004/39/EC. Nothing in this document constitutes a personal recommendation or investment advice as defined
by Directive 2004/39/EC.
Australia: The Australian Financial Services Licence for SCB is Licence No: 246833 with the following Australian
Registered Business Number (ARBN : 097571778). Australian investors should note that this document was prepared for
wholesale investors only (as defined by Australian Corporations legislation).
China: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited
which is mainly regulated by China Banking Regulatory Commission (CBRC).
Hong Kong: This document is being distributed in Hong Kong by, and is attributable to, Standard Chartered Bank (Hong
Kong) Limited which is regulated by the Hong Kong Monetary Authority.
Singapore: This document is being distributed in Singapore by SCB Singapore branch only to accredited investors, expert
investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in
Singapore should contact SCB Singapore branch in relation to any matters arising from, or in connection with, this
document.
South Africa: SCB is licensed as a Financial Services Provider in terms of Section 8 of the Financial Advisory and
Intermediary Services Act 37 of 2002. SCB is a Registered Credit provider in terms of the National Credit Act 34 of 2005
under registration number NCRCP4.
UAE (DIFC): SCB is regulated in the Dubai International Financial Centre by the Dubai Financial Services Authority. This
document is intended for use only by Professional Clients and should not be relied upon by or be distributed to Retail
Clients.
United States: Except for any documents relating to foreign exchange, FX or global FX, Rates or Commodities, distribution
of this document in the United States or to US persons is intended to be solely to major institutional investors as defined in
Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance
thereof represent and agree that they are a major institutional investor and understand the risks involved in executing
transactions in securities. Any US recipient of this document wanting additional information or to effect any transaction in
any security or financial instrument mentioned herein, must do so by contacting a registered representative of Standard
Chartered Securities (North America) Inc., 1 Madison Avenue, New York, N.Y. 10010, US, tel + 1 212 667 1000.
WE DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES ARE
REGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL
APPROPRIATE U.S. STATE AUTHORITIES; OR (B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY
FOR AN EXEMPTION UNDER THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL
SECURITIES TO U.S. PERSONS UNLESS (i) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE
PERSONNEL ARE PROPERLY REGISTERED OR LICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED
COMPANY AND THE APPROPRIATE PERSONNEL QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S.
FEDERAL AND STATE LAWS.
The information on this document is provided for information purposes only. It does not constitute any offer,
recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment
strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any
such future movements will not exceed those shown in any illustration. Users of this document should seek advice
regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to on
this document and should understand that statements regarding future prospects may not be realised. Opinions,
projections and estimates are subject to change without notice.
The value and income of any of the securities or financial instruments mentioned in this document can fall as well as rise
and an investor may get back less than invested. Foreign-currency denominated securities and financial instruments are
5
Country Briefing | 20 January 2009
Ref: GR-J0109
subject to fluctuation in exchange rates that could have a positive or adverse effect on the value, price or income of such
securities and financial instruments.
Past performance is not indicative of comparable future results and no representation or warranty is made regarding future
performance.
SCB is not a legal or tax adviser, and is not purporting to provide you with legal or tax advice. If you have any queries as to
the legal or tax implications of any investment you should seek independent legal and/or tax advice.
SCB, and/or a connected company, may have a position in any of the instruments or currencies mentioned in this
document. SCB has in place policies and procedures and physical information walls between its Research Department and
differing public and private business functions to help ensure confidential information, including ‘inside’ information is not
publicly disclosed unless in line with its policies and procedures and the rules of its regulators. You are advised to make
your own independent judgment with respect to any matter contained herein.
SCB and/or any member of the SCB group of companies may at any time, to the extent permitted by applicable law and/or
regulation, be long or short any securities or financial instruments referred to on the website or have a material interest in
any such securities or related investment, or may be the only market maker in relation to such investments, or provide, or
have provided advice, investment banking or other services, to issuers of such investments.
SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special,
incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss,
damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this
document, its contents or associated services, or due to any unavailability of the document or any part thereof or any
contents or associated services.
Copyright: Standard Chartered Bank 2009. Copyright in all materials, text, articles and information contained herein is the
property of, and may only be reproduced with permission of an authorised signatory of, Standard Chartered Bank.
Copyright in materials created by third parties and the rights under copyright of such parties is hereby acknowledged.
Copyright in all other materials not belonging to third parties and copyright in these materials as a compilation vests and
shall remain at all times copyright of Standard Chartered Bank and should not be reproduced or used except for business
purposes on behalf of Standard Chartered Bank or save with the express prior written consent of an authorised signatory of
Standard Chartered Bank. All rights reserved. © Standard Chartered Bank 2009.
Regulation AC Disclosure:
The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and
attributed to the research analyst or Analysts in the research report accurately reflect their personal opinion(s) about the
subject securities and issuers and/or other subject matter as appropriate; and, (2) No part of his or her compensation was,
is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a
general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.
Data available as of 08:00 GMT 20 January 2009. This document is released on 08:00 GMT 20 January 2009.
Document approved by: Marios Maratheftis, Regional Head of Research, MEPNA

Nice post Kid!

Wish we had more useful information such as this here.



Knight

Dubai Knight wrote:Nice post Kid!

Wish we had more useful information such as this here.



Knight

Behave

sage & onion wrote:

Dubai Knight wrote:Nice post Kid!

Wish we had more useful information such as this here.



Knight

Behave

I was being serious!



Knight

Dubai Knight wrote:

sage & onion wrote:

Dubai Knight wrote:Nice post Kid!

Wish we had more useful information such as this here.



Knight

Behave

I was being serious!



Knight

Please accept my most sincere apologies

Is that the same standard chartered who couldn't open a bank account for two months because the "landmark" field for my US address was not specific enough? The same one that could not cash my rent check beacause they couldn't read the signature (Im still pissed about that one), the same bank who wanted to lend me 200,000 for a car, 150,000 for a personal loan, and 3,000,000 for an apartment (I dont make THAT much by the way).
Yea, real reputable.

Dont you think the same gov't who is going to be bailing this bank out has an interest in keeping these reports positive?

Quite bad. I opened a/c there after British Bank because I had not been satisfied a service of last one but nowadays I guess that BB is much better than another colonial banks...

Red Chief wrote:Quite bad. I opened a/c there after British Bank because I had not been satisfied a service of last one but nowadays I guess that BB is much better than another colonial banks...

Which is British Bank? or are you referring to HSBC which used to be BBME?

sage & onion wrote: are you referring to HSBC which used to be BBME?

That's right.

Edit