We recently revised up our forecasts for 2012 UAE real GDP growth, and are now projecting the economy to expand 3.5% this year, up from last quarter''s forecast of 3.0%. This follows an estimated 3.3% rate of expansion posted in 2011. Broadly speaking, the same problems that have been weighing on the economy since 2009 look set to continue over the coming quarters, with weakness in the domestic real estate market, anaemic credit growth and ongoing deleveraging in the private sector tempering our nearterm outlook. The country will also be hit by trade restrictions on Iran, which will affect port volumes.
However, the bright outlook for the hydrocarbons sector (with supply fears helping to keep oil prices high) coupled with healthy tourism growth will help the country maintain, if not spectacular, at least healthy, economic expansion. Both of these industries will also support the shipping sector, with oil and gas as well as consumer goods passing through the country''s facilities.
As a result, the outlook for the UAE''s ports in 2012 is upbeat. The facilities also benefit from their role as transhipment hubs. Strong growth is forecast by BMI at all of the emirates'' major ports despite the headwinds facing the global economy, though we project that this growth rate will slow over our forecast period to 2016. The country''s ports are proving themselves resilient in the face of increasing regional competition in the Gulf, with the Port of Jebel Ali announcing a capacity expansion to be completed over the mid term.
Headline Industry Data
- Jebel Ali and Port Rashid''s tonnage throughput is forecast to grow by 6.5% in 2012 and to average 5.8% through to 2016.
- Sharjah container throughput (KCT and SCT) is forecast to grow by 6.7% in 2012, averaging 5.7% over the medium term.
- Jebel Ali container throughput is forecast to grow by 13.0% in 2012. Through to 2016, we expect growth to average 8.6%.
- Total trade real growth is forecast at 8.0% in 2012 and to average 7.0% through to 2016.
Key Industry Trends
DP World Clearing Debts With Proceeds From Strong 2011 And Australian Ports Sale BMI believes that DP World''s strong exposure to emerging markets has helped the company enjoy strong profit growth in 2011. The sale of its Australian assets has boosted its financial position, and the fact that the terminals operator plans to pay off US$3bn of debts using existing cash resources in April underlines its strength.
Mubadala Development Company To Establish Fujairah LNG Terminal Abu Dhabi-based Mubadala Development Company is to construct a new terminal in Fujairah to receive supplies of liquefied natural gas (LNG). The terminal will bypass the strategic Strait of Hormuz in order to avoid any attempt by Iran to halt oil shipments in and out of the strait. However, Iran has assured its Gulf neighbours that it will not block the strait, according to Kuwait''s Emir Sheikh Sabah al-Ahmed al-Sabah. The terminal is expected to deliver its first supplies in the next two to three years. UASC Joins The Big League And Links Asia To The Middle East With Mega Vessels
The United Arab Shipping Company (UASC) continues to expand, adding the third of nine 13,470TEU ships to its fleet. Due to the ordering boom in 2008, a number of new mega vessels are due online in 2012, resulting in overcapacity in the sector. With demand declining, this places negative pressure on rates. UASC''s mega vessel plan differs from that of other lines, with the company set to use some of its new fleet to connect Asia and the Middle East.
Key Risks To Otlook
The key risks to our outlook for the UAE come from the continued political unrest in the Middle East. The Arab Spring has not spread to the emirates, but neighbouring Bahrain has been affected and nowhere appears completely immune. BMI considers any serious disruption to trade in the UAE to be an outlying scenario, however. Likewise, were Iran to follow through its threats to close the Strait of Hormuz to global shipping, then there would be considerable downside risk to UAE ports on the Gulf, and upside risk to the Sharjah terminal of Khorfakkan, which lies outside the strait on the Arabian Sea. BMI''s core view is that this will not happen, however.
The UAE is currently enjoying the benefits of the Iran-related tensions, with fears over oil supply thanks to Iran''s threats and Western sanctions against the country helping to keep prices high, swelling the emirates'' coffers. Any significant change to the oil price would bring risk to our macroeconomic forecasts for the country.