By Tom Arnold www.thenational.ae
Non-oil activity was the biggest driver of Abu Dhabi’s GDP last year despite rising oil output, signalling the emirate’s mission to diversify its economy is bearing fruit.
Growth in the non-oil sector reached 5.6 per cent in current prices, according to an annual report released yesterday by the Statistics Centre Abu Dhabi (Scad). Overall GDP grew by 15.9 per cent in current prices to Dh620.2 billion (US$168.85bn), up from Dh546.5bn the year before.
“The non-oil sector is growing relatively well,” said Said Hirsh, the Middle East economist at Capital Economics. “The Government has handled its reserves well to invest in Abu Dhabi and help attract foreign companies.”
Higher oil prices and rises in crude production pushed up the oil sector’s contribution to the economy to 49.7 per cent of GDP last year, from 49 per cent the year before.
Non-oil activity, however, still accounted for more than half of growth, contributing 50.3 per cent of GDP, down from 51 per cent the year before.
Under Abu Dhabi’s Economic Vision 2030, officials hope to cut the emirate’s reliance on oil to 36 per cent of GDP by 2030. As a result, it is investing billions of dollars in stimulating new growth sectors such as tourism, finance, industry and property.
The capital’s economy suffered in 2009 as lower oil prices and reduced business activity caused an 18 per cent drop in GDP in current prices. Scad says it will release next month the GDP estimates for the past five years in real prices, which is the most commonly used GDP data because they take into account inflation.
Activity rebounded last year across all sectors, however, Scad’s data show.
Mining and quarrying, which include oil production, rose 28.9 per cent in current prices. Financial sector activity rose by 14.4 per cent, manufacturing 10.8 per cent, property and business activity 6.4 per cent, wholesale and retail trade and repair services 5.3 per cent, and hotels and restaurants 4.6 per cent.
Overall, salaries for workers in Abu Dhabi last year rose 9.1 per cent to Dh117.4bn.
UAE crude production, the bulk of which Abu Dhabi accounts for, rose to about 2.32 million barrels per day (bpd) last year, up from 2.17 million bpd in the previous year, according to a recent report from Opec. Export earnings rose to US$74bn, up nearly 30 per cent from the year before, the report said. Average oil prices accelerated by almost $15 above levels of $60 per barrel in 2009.
With Nymex oil prices now at about $100, along with a broader improvement in non-hydrocarbon activity, analysts expect stronger economic prospects again this year.
“We have forecast GDP for Abu Dhabi to be significantly higher mainly due to higher oil production,” said Khatija Haque, a GCC economist at Emirates NBD.
One of the keys to driving faster growth in the non-oil economy is stronger bank lending to the private sector, say economists.
Bank lending rose 3 per cent on an annual basis last month from the same period the year before, Central Bank data released yesterday showed. Loan growth remains weaker than in Saudi Arabia and Qatar.
“There’s more liquidity in the market and deposit are OK, but banks are still a little bit cautious, and high retail lending rates are dissuading lending,” said Ms Haque.
Bank deposits last month rose to Dh1.12 trillion, up 10.9 per cent from June last year.
Last month, “M2” money supply, an indicator of future inflation pressures, rose at an annualised rate of 12.5 per cent, down slightly from the previous month’s 13 per cent annualised rate of increase. “M3”, the broadest measure of money supply, increased at an annual rate of 12.4 per cent last month, down 0.7 per cent from the previous month as government deposits dropped.