Weekly GCC Economic updates
The UAE is expected to lead economic growth in the Arabian Gulf in 2017
(12 April 2017 to 18 April 2017)
The economic growth in the Middle East had a mixed surge in the first quarter of the year 2017. The nonoil sectors had a strong foot in the first quarter of the year 2017 whereas the oil sector weakened. The picture from the Gulf region also was not different. The region is heavily dependent on oil source of revenue. But the UAE has been among the countries in the region that has done the best in diversifying its economy successfully. The latest update shows that around 70% of the Abu Dhabi GDP is from non-oil sector in the last quarter of the year 2016. It means only around 30 of the total Abu Dhabi GDP is from oil sector. According to the research from the National Bank of Abu Dhabi (NBAD), the UAE is expected to lead economic growth in the Arabian Gulf in the year 2017.
Saudi Arabia is targeting enormous growth in domestic tourism by 2020: The Government of Saudi Arabia started investing huge in the domestic tourism across the country and experts expect a 40 percent increase in the number of internal trips made by the year 2020. This is a clear indication from the government of Saudi Arabia that the shift to nonoil revenue source is in its successful path. Following the announcement of Saudi Vision 2030, vast initiatives have been taken to encourage Saudis to explore all that the country has to offer. The media reports, there is huge increase in the number of internal trips by the residents of the country in comparison with previous year. Recently the country announced plans for the construction of a massive cultural, sports and entertainment city in Al Qidiya, southwest of Riyadh.
Dubai hotel rates dropped: The records for the month March shows that there is decline in the occupancy rates of the hotels in Dubai and Abu Dhabi. As per the report in Arabian Business; the average daily rate for hotels fell by around 10 percent in the month March, to AED756.21 compared to the same month last year. Revenue per available room (RevPAR) – the most indicative statistic for the hotel industry – came down by 11 percent to AED652.61 year-on-year. New supply of the rooms in the emirate is giving continuous pressure on average daily rates in Dubai.
Minimize the waste and reuse the waste:
Dubai Municipality targets to reduce the waste to below 2%. And the target is to reuse the organic waste to produce energy. Hussain Nasser Lootah, director-general of the authority said; it is the part of the strategy of the municipality. He said: “We have completed the preparation of a comprehensive plan to deal with waste. We are looking at it from two main angles – the first is to minimize waste, and the second is to reuse it”. The reports say, the municipality has successfully reusing around 10 percent of waste and targeting to recycle 75% of waste by 2020.
Is there decline in the property price in the first quarter of the year 2017?
Average apartment sales prices in Abu Dhabi fell by 1% only in Q1 2017 while villa prices dropped by 9%. According to the Abu Dhabi Residential Market Q1 2017 report from international property agency Chestertons MENA, “Sales prices are expected to further decline”. It may continue till 2018, and will recover once the expected increase in government spending comes to into effect. At the same time, a report from compareit4me.com shows that only 10% of Dubai tenants see rents decrease in 2016. The majority of Dubai tenants are either paying the same rent or more than they were paying on rent last year despite reports that rents are falling in the emirate. Recently the UAE Ministry of Finance disclosed, sale and lease of residential properties would be exempt from VAT in the UAE. Whereas the first sale of residential property will not be exempted. At the same time, sales and leases of commercial properties will be taxed at the standard VAT rate ie; 5%. The impact of VAT in the real estate market can be measured only once it is implemented. Since the rate of VAT is only a marginal rate, it will not make any significant impact in the industry. As per the International Real Estate Consultancy Cluttons; the Abu Dhabi real estate may further plunge in this long summer.
Prepared By : CA. Manu Nair, FCA.
CEO, Emirates Chartered Accountants Group
Source: The content of this article is taken from different online business news updates or from daily newspapers.