Help!

beatles-helpLast year, the UAE economy grew by 6.5% with GDP rising to US$ 375 billion, mainly because of higher oil prices and increasing investment from within the region moving to a comparatively safe zone. Saudi’s GDP accounted for 43.1% of the GCC total of US$ 1.482 trillion with the UAE second at 25.3%. This figure was more than Qatar and Kuwait combined: however its per capita GDP at US$ 45,731 lagged behind these two GCC countries. The Washington-based Institute for International Finance is forecasting a 5.3% growth this year.

Preliminary figures covering the first nine months of 2012 indicate that UAE non-oil exports rose by 60.8% to US$ 37 billion. The most valuable traded item was gold at US$ 21.7 billion followed by ethylene polymers (US$ 1.4 billion) and jewellery (US$ 1.3 billion). Over the same period, there was a 12.5% hike in imports to US$ 134.9 billion. Trade in the free zones rose to US$ 3.5 billion, comprising US$ 1.7 billion imports, US$ 1.5 billion re-exports and US$ 0.3 billion exports.

A Ministry of Foreign Trade report shows that UAE exports of plastics increased by a massive 127% in H1 2012. With its price doubling to US$ 1,790 per tonne since 2008 and with GCC production estimated at US$ 44 billion, it is not surprising to see the Dubai Gold and Commodities Exchange launching a plastics future contract – the first of its kind in the world.

A recent report showed that Dubai luxury property rose by 20% in 2012 making it the second highest global increase behind Jakarta which had  a massive 38% jump. Impressive gains such as this go a long way in clawing back the 60% fall following the GFC in 2008 with flatter rises expected in the current year.

Work on a US$ 3 billion project at Meydan City is expected to start in Q2 according to the Indian developer, Sobha. The project, covering 8 million sq ft, will take eight years to complete and will comprise hotels, shopping mall, villas and apartments.

2012 was a landmark year for the tourism industry with visitor numbers exceeding 10 million for the first time ever. Hotel guest numbers jumped 9.5% to 9.96 million and with the number of nights increasing by 14%, there was an 18% surge in hotel revenue to US$ 5.13 billion. Saudi Arabia accounted for 11.1% of all visitors with India, UK, US and Russia (with a 54% rise) making up the top five.

Starwood Hotels & Resorts Worldwide has recently moved their headquarters from New York to Dubai. The group, which runs the Sheraton and Le Meridien brands, plans to increase its Dubai portfolio by a further six properties. This is another sign that the emirate is now probably the centre for the world’s hospitality industry.

One tourist attraction not going ahead is the Formula One theme park that was to be built by troubled Union Properties. When launched seven years ago, the project was slated to cost US$ 360 million but after spending an estimated US$ 260 million, the project was suspended in 2009 when a further US$ 327 million was needed to complete the development. Now it seems that Bernie Ecclestone is set to receive US$ 10 million as a penalty for the abandonment of the theme park.

The local e-commerce sector is growing with on-line transactions topping US$ 11 billion and UAE’s total spend is equivalent to over 50% of the total GCC business. No wonder then that with foreign investment companies eyeing this burgeoning market, Tiger Global Management has just acquired the three year-old Dubai-based Cobone.com for an undisclosed amount but which could be around US$ 40 million.

With 3,500 vehicles currently in its fleet, Dubai Taxi Corporation has just ordered a further 1,100 Toyotas which will bring that manufacturer’s share of that market to 86%.

Having projects already in Brazil, Cameroon and Guinea, Dubai Aluminium Co has just purchased a 20% share in a Chinese calciner project. The joint venture with Hong Kong-based Sinoway Carbon Energy will secure Dubal’s future supply of calcined petroleum coke.

The latest Dubai entity seeking finance is Emirates NBD, 55.5% owned by the Investment Corporation of Dubai. The amount of the proposed bond is unknown but it is thought that it will be at least US$ 500 million. Some of the proceeds would go to repay part of the US$ 3.43 billion it received from the Ministry of Finance at the peak of the 2008 global crisis.

On the subject of debt, it must not be forgotten that Dubai is scheduled next year to repay US$ 22 billion, most of which relates to Dubai World. A large portion of this emanates from loans granted by Abu Dhabi and the UAE Central Bank when Dubai was on its economic knees following the GFC in late 2009.

As part of its on-going financial restructuring, DP World received US$ 736 million when selling interests in two container terminals and a logistics centre in Hong Kong. Ridding itself of a 55.2% share in its Asia Container Terminal raked in US$ 277 million whilst divesting 75% In CSX World Terminal and the ATL Logistics Centre netted the world’s third largest global ports operator a further US$ 459 million. This latest transaction is expected to see the company post a US$ 151 million gain.

DP World, one of only two stocks trading on Nasdaq Dubai, was at US$ 14.40 at the close of business on Thursday. DEWA’s latest US$ 1 billion sukuk – rated BBB – was listed on Monday which brought the value of registered sukuk on that bourse to US$ 6.24 billion.  Meanwhile Dubai Financial Market Index had another good week up 1.8% to 1916 from its Sunday opening of 1882. The Index is more likely to hit 1800 rather than 2000 in the coming weeks.

As its GDP shrinks at an annual rate of 2.4%, allied with rises in unemployment to 11.2% and public debt at 127%, it comes as no surprise to see Fitch downgrade the Italian economy to BBB+. This comes at the same time that the banks’ total gross bad loans increased by 16.6% to US$ 162.8 billion with the situation expected to worsen in H1.

Global markets are a little perturbed by the fact that comedian, Beppe Grillo, may hold the balance of power as centre left leader, Pier Luigi Bersani, tries to form a minority government  The political uncertainty could have a negative knock-on effect on the PIGS – Portugal, Ireland, Greece and Spain.

Unemployment rates in these four countries range between 15% – 26% – compared to say the likes of Germany and the Netherlands where it is around 5%.  Wage rates have remained flat in three of the countries with Ireland actually witnessing an 8% fall whereas Germany has seen labour costs rise by 10%. Even more depressing is the disparity in GDP where Spain, Ireland and Portugal have fallen 7% and Greece 24% since the GFC compared to Germany where the growth has been over 7%. All four countries have been racked by austerity measures moreso than most of their eurozone partners. This has resulted in falls in the PIGS’ domestic demand of between 13% – 25% and a weakening in their domestic investment.

Then there is the distinct possibility that Europe’s third largest market, the UK, will see itself in a triple dip recession. All economic indicators are heading south with the latest being industrial production which fell sharply in January. Following his “omnishambles” budget last year and having to admit that he will miss his own targets twelve months later, Chancellor George Osborne is in for a torrid time next Tuesday. Help!

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