Dubai – Mubasher: The UAE’s real growth of gross domestic product (GDP) is expected to see an increase in the coming two years, supported by the improvement of the non-oil sector, mainly due to increasing construction activity ahead of Dubai’s Expo 2020 event, the National Bank of Kuwait (NBK) said in a report.

The GCC nation’s GDP is expected to rise from 2.2% in 2018 to 2.4% and 2.7% in 2019 and 2020, respectively.

“While headline growth will see only a moderate contribution from the oil sector, on account of the UAE’s participation in another round of OPEC+ production cuts in 2019 in order to balance oil supply, it will benefit from elevated construction activity and government spending ahead of the Expo 2020 on the non-oil side,” the report highlighted.

In October 2018, the UAE cabinet approved a record federal budget of AED 60.3 billion for the full-year 2019.

The UAE’s credit growth will continue to recover as gains in business lending activity offset some of the monetary tightness resulting from the higher interest rate, the Kuwaiti lender said.

Moreover, further oil price declines will pose jeopardy to government revenues, which could possibly force the government to scale back spending, and in terms of business confidence and banking sector liquidity.

Under the OPEC’s production agreement, the UAE is expected to reduce oil production by 2.5% to 3.10 million barrels per day (bpd) during the full-year 2019.

Under the UAE’s strategic plan for growth, the cabinet started implementing the 100% foreign ownership and 10-year residency visas for expats in a bid to attract further investments to the GCC country.

The ten-year visa will be offered for doctors, scientists, inventors, specialists in culture and art and researchers working in science and knowledge, and they are allowed to include their spouses and children under their visa.

In further support of foreign direct investment (FDI), Emirates’ President issued a new law to establish a Foreign Direct Investment Unit in the Ministry of Economy to be responsible for promoting initiatives that help create a more attractive investment environment.

Accordingly, FDI in the UAE is projected to increase by almost 6% year-on-year in 2018 to reach $11-11.5 billion, which is by far the largest in the region, and it is forecast to rise by 15% and 20% by the end of 2020.

As for the GCC country’s inflation, it is expected to hit 1.5% in 2020 instead of 3.5% in 2018.