The International Monetary Fund yesterday raised GDP forecasts for Qatar to 5.9% from 5%, citing “a large public investment programme to advance economic diversification” and to prepare for the 2022 soccer World Cup. The IMF also increased its growth forecast for the United Arab Emirates, citing rising real estate prices and Dubai’s World Expo 2020 win.
The Washington-based IMF said the UAE is set to grow 4.4% this year, compared with an estimate of 3.9% in October. With real estate prices rising at a fast pace “the award of World Expo 2020 has further strengthened growth prospects,” the fund said in its World Economic Outlook released yesterday.
Real estate prices in Dubai climbed 33% in the first quarter of this year from the same period in 2013, according to Jones Lang LaSalle. Dubai, whose economy is forecast to expand about 4.7% this year, won the bid to host Expo 2020 in November. The Arab world’s second-biggest economy expanded 4.8% last year, according to IMF data.
The UAE’s economy is expanding as tourism, retail sales, trade and real estate industries grow. Passenger traffic through Dubai and Abu Dhabi’s airports rose to a record in January, reaching 6.4mn and 1.6mn respectively. The stock markets of Abu Dhabi and Dubai are among the world’s top 10 performers this year, according to data compiled by Bloomberg. The UAE is home to about 6% of the world’s proven oil reserves.
The IMF cut its 2014 growth estimate for Saudi Arabia to 4.1% from 4.4%.
IMF also said Turkish economic growth will slow more than previously expected this year because of higher borrowing costs, a weaker lira and a sharp fall in private consumption.
In its latest World Economic Outlook report, the IMF forecast real gross domestic product growth of 2.3% this year, rising to 3.1% in 2015. In its previous report last October it had predicted 2014 growth of 3.5%.
“Growth in Turkey is expected to weaken in 2014 … mainly as a result of a sharp slowdown in private consumption driven by macro-prudential measures, the sizeable exchange rate adjustment and interest rate hikes,” the report said. “The region as a whole will see slightly weaker growth in 2014 than it did in 2013, mainly on account of Turkey, whose economy is much more cyclically advanced than those of other countries in the region,” it said.
Turkey’s economy grew 4% last year, official Turkish data showed at the end of last month. The government has an official forecast of 4% growth for this year. Turkey’s central bank raised interest rates sharply at the end of January as it battled to defend the lira after it tumbled to record lows. The lira has since recovered and Prime Minister Tayyip Erdogan called last week for a rate cut, saying his AK Party’s strong showing in recent local elections had boosted markets and lower rates would encourage investors.
Central bank governor Erdem Basci hinted on Monday at possible interest rate cuts for the first time in a year, but added that they would be gradual and that the bank alone would decide on their timing.
The IMF also raised its forecast for consumer price inflation to 7.8% this year, up from a prediction of 5.3% in its October report. Inflation was expected to ease to 6.5% in 2015.
The report said growth was led by private consumption in Turkey, unlike elsewhere in emerging Europe during the 2013 economic recovery where it continued to be driven by external demand.
“The rise in private consumption reflected mostly pro-cyclical macroeconomic policies in Turkey,” it said.
“After an initial improvement, financial market volatility has increased since early fall in most countries. As a result, the region, excluding Turkey, experienced capital outflows,” it said.
The current account deficit, generally a weak point in the Turkish economy, was seen falling to 6.3% of GDP this year from 7.9% last year and was expected to decline further to 6.0% in 2015.
Growth in Egypt’s economy is also expected to remain sluggish this year as political uncertainty keeps tourists and foreign investors away, the IMF said yesterday.
The economy of the Arab world’s most populated country was forecast to grow by 2.7% this year after expanding by 2.1% in 2013, the IMF said.
“Growth in 2014 is expected to be broadly the same as in 2013, as political uncertainty will continue to weigh on tourism and foreign direct investment,” it said.
The slow performance was likely despite the “fiscal stimulus” of support from Gulf countries, which promised billions of dollars in aid to Egypt after the army ousted Islamist president Mohamed Morsi in July.
Saudi Arabia pledged $5bn in aid to the military-installed government in Cairo, with Kuwait and the United Arab Emirates offering a combined $7bn.