03 December 2008
Strong crude prices allied with a surge in non-oil exports and capital inflow boosted the UAE's balance of payment (BoP) surplus by a staggering eight times in 2007 but its fiscal surplus fell due to higher spending.
Official figures released yesterday showed the BoP surplus rocketed to a record Dh183.2 billion in 2007 from Dh23.8bn in 2006 although the current account recorded a modest surplus rise to Dh136.9bn from Dh132.3bn in the same period.
A breakdown showed the surge in the BoP surplus was mainly due to a sharp increase in exports and capital inflow by the private sector despite a high growth in outgoing funds by the government and other public establishments.
The figures by the Central Bank, published in the 150-page 2008 economic report marking the UAE National Day, showed the country's consolidated finance accounts (CFA), which covers the federal budget and spending by each emirate, recorded a massive surplus for the third year running but it was slightly lower than the 2006 surplus because of higher expenditure.
Details of the BoP, which reflects a nation's real fiscal position, showed total exports and re-exports jumped by more than Dh100bn to Dh664.3bn, while imports rose to a record Dh428.1bn.
The Central Bank attributed the surge in imports to lower US dollar and an upswing in business activity in the emirates.
It was this upswing and the oil price surge to record high levels that have stoked inflation in the UAE and prompted counter-measures by the Central Bank and other official departments.
Inflation climbed to a record 11.1 per cent last year and is heading for another record this year before abating in 2009 as a result of a sharp fall in oil prices and strengthening dollar.
"Owing to the increase in receipts of exports of the hydrocarbon and non-hydrocarbon sectors, the surplus in the trade balance rose in 2007 by 11.8 per cent compared to 2006, reaching Dh236.15bn, despite increase in total imports," the Central Bank said.
It said the value of oil and gas exports jumped by 20.4 per cent to Dh309.9bn, while there was an equivalent growth in non-oil exports to Dh125.7bn. It attributed the surge in hydrocarbon exports to higher prices of crude oil, condensates and petroleum products in 2007.
According to the report, the average price of the UAE crude rose by 12.9 per cent from $ 63.53 a barrel in 2006 to $ 71.70 a barrel in 2007.
"As a result, the value of oil exports [including condensates, which are not included in the country's production quota set by Opec] grew by 22.5 per cent from Dh213.37bn in 2006 to Dh261.42bn in 2007, while the value of gas exports increased by 9.3 per cent to Dh28.50bn," it said.
"Owing to the established government policy of diversifying sources of income through creation of a favourable environment for the industrial sector and due to local establishments' continued financing at reasonable terms, the value of goods exports continued to rise over the past few years, reaching Dh42.07bn in 2007, compared with Dh29.23bn in 2006."
The report showed exports by the free zones also increased from Dh75.29bn in 2006 to Dh83.66bn in 2007, while re-exports, including non-monetary gold, rose by 32 per cent to Dh228.69bn from Dh172.7bn.
"On the other hand, the value of total imports (CIF), including estimated goods imports to all emirates of the country, free zone imports and imports of non-monetary gold, set a new record, reaching Dh486.58bn in 2007 against Dh367.46bn in 2006," the bank said.
"This may be attributed to population increase, the need to meet the requirements of re-exports, a higher propensity to spend among individuals and increase in numbers of tourists, in addition to the role of commercial exhibitions and conferences held at various times of the year in invigorating commercial activity... it is noteworthy that as a result of depreciation of the dollar, and hence the UAE dirham against most major currencies and currencies of UAE major trade partners, in addition to the increase in prices of commodities in countries of origin, the increase in value of imports may not reflect an increase in their volume."
On the financial account side of the BoP, the report showed a massive increase in private fund inflow to Dh217bn last year from Dh87bn in 2006.
The bulk of the inflow was attributed to banks, which brought in a staggering Dh178bn in 2007 compared with Dh35bn in 2006.
Incoming direct investment also grew to Dh52.1bn from Dh47bn, while outward investment swelled to Dh53.5bn from Dh40bn.
Outgoing funds by the government and other public sector institutions jumped to an all time high of Dh175.8bn from Dh146.5bn.
Bankers attributed the increase to the massive current account surplus and the country's strategy to tap surging oil revenue to consolidate its foreign assets.
In contrast, the UAE's actual fiscal surplus recorded a slight decline in 2007 because of a surge in public expenditure, the figures showed. From Dh75.18bn in 2006, the surplus edged down to around Dh69bn in 2007 but it remained far higher than the 2005 surplus of Dh39.4bn.
A breakdown showed higher spending was the main reason for the lower surplus as actual expenditure climbed by 27 per cent to a record Dh159.72bnlast year from Dh125.97bnin 2006.
Revenues grew by only 13 per cent to Dh226.7bn from Dh201bn and the bulk of them were in oil and gas exports, which peaked at nearly Dh214.9bn in 2007 compared with around Dh164.7bn in 2006.
An expenditure breakdown showed most of it was in current spending, which stood at Dh121.3bn compared with Dh103.9bn in the year 2006.
Strong crude prices allied with a surge in non-oil exports and capital inflow boosted the UAE's balance of payment (BoP) surplus by a staggering eight times in 2007 but its fiscal surplus fell due to higher spending.
Official figures released yesterday showed the BoP surplus rocketed to a record Dh183.2 billion in 2007 from Dh23.8bn in 2006 although the current account recorded a modest surplus rise to Dh136.9bn from Dh132.3bn in the same period.
A breakdown showed the surge in the BoP surplus was mainly due to a sharp increase in exports and capital inflow by the private sector despite a high growth in outgoing funds by the government and other public establishments.
The figures by the Central Bank, published in the 150-page 2008 economic report marking the UAE National Day, showed the country's consolidated finance accounts (CFA), which covers the federal budget and spending by each emirate, recorded a massive surplus for the third year running but it was slightly lower than the 2006 surplus because of higher expenditure.
Details of the BoP, which reflects a nation's real fiscal position, showed total exports and re-exports jumped by more than Dh100bn to Dh664.3bn, while imports rose to a record Dh428.1bn.
The Central Bank attributed the surge in imports to lower US dollar and an upswing in business activity in the emirates.
It was this upswing and the oil price surge to record high levels that have stoked inflation in the UAE and prompted counter-measures by the Central Bank and other official departments.
Inflation climbed to a record 11.1 per cent last year and is heading for another record this year before abating in 2009 as a result of a sharp fall in oil prices and strengthening dollar.
"Owing to the increase in receipts of exports of the hydrocarbon and non-hydrocarbon sectors, the surplus in the trade balance rose in 2007 by 11.8 per cent compared to 2006, reaching Dh236.15bn, despite increase in total imports," the Central Bank said.
It said the value of oil and gas exports jumped by 20.4 per cent to Dh309.9bn, while there was an equivalent growth in non-oil exports to Dh125.7bn. It attributed the surge in hydrocarbon exports to higher prices of crude oil, condensates and petroleum products in 2007.
According to the report, the average price of the UAE crude rose by 12.9 per cent from $ 63.53 a barrel in 2006 to $ 71.70 a barrel in 2007.
"As a result, the value of oil exports [including condensates, which are not included in the country's production quota set by Opec] grew by 22.5 per cent from Dh213.37bn in 2006 to Dh261.42bn in 2007, while the value of gas exports increased by 9.3 per cent to Dh28.50bn," it said.
"Owing to the established government policy of diversifying sources of income through creation of a favourable environment for the industrial sector and due to local establishments' continued financing at reasonable terms, the value of goods exports continued to rise over the past few years, reaching Dh42.07bn in 2007, compared with Dh29.23bn in 2006."
The report showed exports by the free zones also increased from Dh75.29bn in 2006 to Dh83.66bn in 2007, while re-exports, including non-monetary gold, rose by 32 per cent to Dh228.69bn from Dh172.7bn.
"On the other hand, the value of total imports (CIF), including estimated goods imports to all emirates of the country, free zone imports and imports of non-monetary gold, set a new record, reaching Dh486.58bn in 2007 against Dh367.46bn in 2006," the bank said.
"This may be attributed to population increase, the need to meet the requirements of re-exports, a higher propensity to spend among individuals and increase in numbers of tourists, in addition to the role of commercial exhibitions and conferences held at various times of the year in invigorating commercial activity... it is noteworthy that as a result of depreciation of the dollar, and hence the UAE dirham against most major currencies and currencies of UAE major trade partners, in addition to the increase in prices of commodities in countries of origin, the increase in value of imports may not reflect an increase in their volume."
On the financial account side of the BoP, the report showed a massive increase in private fund inflow to Dh217bn last year from Dh87bn in 2006.
The bulk of the inflow was attributed to banks, which brought in a staggering Dh178bn in 2007 compared with Dh35bn in 2006.
Incoming direct investment also grew to Dh52.1bn from Dh47bn, while outward investment swelled to Dh53.5bn from Dh40bn.
Outgoing funds by the government and other public sector institutions jumped to an all time high of Dh175.8bn from Dh146.5bn.
Bankers attributed the increase to the massive current account surplus and the country's strategy to tap surging oil revenue to consolidate its foreign assets.
In contrast, the UAE's actual fiscal surplus recorded a slight decline in 2007 because of a surge in public expenditure, the figures showed. From Dh75.18bn in 2006, the surplus edged down to around Dh69bn in 2007 but it remained far higher than the 2005 surplus of Dh39.4bn.
A breakdown showed higher spending was the main reason for the lower surplus as actual expenditure climbed by 27 per cent to a record Dh159.72bnlast year from Dh125.97bnin 2006.
Revenues grew by only 13 per cent to Dh226.7bn from Dh201bn and the bulk of them were in oil and gas exports, which peaked at nearly Dh214.9bn in 2007 compared with around Dh164.7bn in 2006.
An expenditure breakdown showed most of it was in current spending, which stood at Dh121.3bn compared with Dh103.9bn in the year 2006.
By Nadim Kawach
© Emirates Business 24/7 2008
