Just to prove that the economy is on the mend, the world’s most expensive reading glasses have gone on sale in Dubai. And what do you get for US$ 75k – hand-crafted glasses, made in the USA, that are 18 carat gold with a sapphire and a diamond (for show I expect). One does not need any glasses to see that oil has been a major contributor to this recovery.
Thanks to average 2011 crude prices of US$ 110 and daily production in the region of 2.6 million barrels, UAE has again positioned itself as the second largest Arab economy. This was reflected in the country’s GDP increasing by almost 21% to US$ 360 billion. A massive 50% increase in crude prices over the year saw the country earn a record US$ 112 billion (compared to US$ 75 billion in 2010). Even though the year saw a 23% jump in imports, its current account rose to US$ 33 billion – a threefold increase – and its sovereign wealth fund has estimated assets of US$ 600 billion.
Despite higher air fares because of the spike in fuel prices, local hotels have already recorded record figures for Q1. Tourist figures will be further heightened by over 400,000 cruise passengers this year with more than 100 cruise ship calls expected to berth at the emirate’s Port Rashid.
With the temperatures rising, preparations are well under way for the 15th Dubai Summer Surprises which will start on 14 June. It is amazing to consider that last year the festival brought in over four million visitors and added US$ 2.4 billion to the Dubai economy. With the holy month of Ramadan starting mid-July, there is hope that records will be broken again in 2012. And the knock-on effect for, inter alia, the hotels, Emirates and retail will be considerable.
Local SMEs – which account for about 90% of the UAE economy – have been given a potential boost by HSBC’s announcement that it will set aside US$ 270 million for business loans of which 30% will be earmarked for Emirati-owned entities. This may help offset earlier news that this bank’s lending in the region had shrunk by 1% whereas elsewhere in the world all their loan books had headed north. HSBC’s total lend to local SMEs is in the region of US$ 600 million. Undoubtedly the nurturing of this sector is of paramount importance as it will be the key driver of future economic growth.
Some experts have indicated that commercial fraud costs the UAE US$ 160 million a year with the usual suspects being auto spare parts, tobacco, medicines, cosmetics and electrical appliances. Much is being done by the relevant authorities to tackle this growing problem.
Despite having some of the best highways in the world, Dubai does have a problem with some of its motorists. Last year, it was estimated that road accidents cost the UAE economy an estimated US$ 4.6 billion along with a human cost of 720 deaths and 7,800 injuries. In 2011, there were over 1.3 million speeding violations of which more than half were caught by cameras on the Sheikh Zayed Highway. After cancer and heart attack, speeding is thought to be third highest cause of death here.
Whilst on the subject of traffic violations, an interesting anecdote from Saudi Arabia where a man there was trying to settle his fines at a payment machine. Having pressed the wrong numbers, he found that he had traffic fine details of the King. He was so impressed and surprised to see the ruler being fined that he actually paid the fines amounting to US$ 2,000!
The Dubai Financial Market could do with a little of Saudi largesse following another flat week that ended with a 10 point gain to close on 1480. Expect little change (at least upwards) for the second half of May as the shares will be range bound for the foreseeable future.
In a recent blog, it was considered that Facebook was somewhat overvalued and so it has proved. No doubt the shares will continue to fall even further than from their first week close of US$ 33 and once again prove that many an investor lose money from a combination of their greed and ignorance.
The continuing euro zone crisis has heightened concerns for Dubai-based entities to refinance debt as European lenders now have tougher requirements in relation to their own capital buffers. Falling oil prices and the fact that growth is slowing down appreciably in countries such as China and India are areas of concern that will impact on the local economy here.